MW Consumers are anxious ahead of the election. Corporate America is feeling it
By Bill Peters
Earnings Watch: Dozens of companies have weighed in on the possible impact of the election. 'Who the hell knows?' one CEO says
Like it or not, there's an election on Tuesday. Voters are stressed. And to at least a small degree, so are corporations.
According to a FactSet analysis released Friday, 116 S&P 500 companies over the past month and a half have mentioned the word "election" or "elections" during quarterly earnings calls. Of those, 38 - from airlines to tool-makers to large brewers - cited "a slowdown or pause in economic, business, or customer activity due at least in part to the election."
Still, despite whatever happens after this week, many executives expect a rebound afterward, that analysis found. And many characterize the election as just one of an array of factors driving business trends.
Polls generally show a close matchup between Vice President Kamala Harris and former president Donald Trump. That election arrives as the economy and higher costs of living remain top-of-mind for much of the nation, and as voters brace for any unrest that could follow, whether or not the results end up being contested.
"Our outlook also contemplates a challenging operating environment due to persistent economic headwinds and several one-off dynamics in Q4, specifically greater consumer attention on U.S. elections, a shorter holiday shopping period this year from Hurricane Milton in early October," Steve Priest, eBay Inc.'s $(EBAY)$ chief financial officer, said on the e-commerce platform's earnings call last week.
Over at homebuilder D.R. Horton Inc. $(DHI)$, Chief Executive Paul Romanowski said during its earnings call last week that homebuyers, thanks in part to the election, are still waiting out higher prices in a tight market.
"While mortgage rates have decreased from their highs earlier this year, many potential homebuyers expect rates to be lower in 2025," he said. "We believe that the volatility of rates, combined with general uncertainty during the election season, is causing some buyers to stay on the sidelines in the near-term."
Later in the call, Chief Operating Officer Michael Murray added: "I think everybody would be happy the election is over. I think that will help buyer sentiment and the ability to move forward with their life decision."
Wells Fargo & Co.'s $(WFC)$ chief financial officer, Mike Santomassimo, also suggested consumers and businesses would feel a bit better once the election is over.
"You get past the election, you see rates come down a little bit," he said. "I think all those things will come together and help give clients more confidence about either building inventories or making further capital expenditures that they're holding off on now."
On other earnings calls, air carriers Southwest Airlines Co. $(LUV)$ and United Airlines Holdings Inc. $(UAL)$ say they expect a brief pullback in travel around the election. IBM said $(IBM)$ the election was one of the "temporary" factors that had weighed on discretionary spending and its consulting business. Constellation Brands Inc. $(STZ)$, which sells Corona and other alcohol brands, said "whenever there is a scenario where you have a federal election that is close, you often have people pull back."
Other executives were trying to parse the impact of tariffs - a cornerstone of Trump's economic agenda - rent-control policy in California, tax, energy and health policies, according to the FactSet analysis. Retirement and antitrust regulations, where regulators under the Biden administration have taken a more aggressive stance, also came up.
But gauging a new administration's impact is, obviously, difficult, amid the flood of campaign promises and squishy policy talk, and with the makeup of Congress not yet clear either. Nicholas Pinchuk, the chief executive at tool and equipment maker Snap-On Inc., perhaps spoke for much of the business world when asked about the impact of tariffs.
"Who the hell knows? Who knows? You know what I mean?" he said on the company's earnings call last month.
"You hear so many different things," he said. "We're not going to tax tips; we're not going to tax overtime; we're going to control prices; we're going to ding the supermarket; we're going to tax unrealized capital gains; we're going to tear up the world. Welcome to the Mad Hatter's tea party."
He added a little later: "Of course, if they tear up everything in the world, it'll take some adjustment for that."
This week in earnings
For the week ahead, 103 S&P 500 companies report quarterly results, according to FactSet.
KFC and Taco Bell owner Yum Brands Inc. $(YUM)$ reports results, after taking precautions following an E. coli outbreak at McDonald's Corp. $(MCD)$ Ride-hailing platform Lyft Inc. $(LYFT)$ also reports, in the wake of results from rival Uber Technologies Inc. $(UBER)$. Earnings are also forthcoming from movie-theater chain and meme stock AMC Entertainment Holdings Inc. $(AMC)$, after one analyst grew more upbeat on the company and an industry recovery.
Handbag maker Tapestry Inc. will issue results after a federal judge blocked its planned $8.5 billion acquisition of Capri Holdings $(CPRI)$. Qualcomm Inc. $(QCOM)$, which the Wall Street Journal reported recently eyed a possible takeover of Intel Corp. $(INTC)$, will also report. And amid the current austerity stretch for the entertainment industry, Warner Bros. Discovery Inc. (WBD) and Paramount Global Inc. (PARA) also report.
Elsewhere, results are due from Rivian Automotive Inc. $(RIVN)$, Palantir Technologies Inc. (PLTR), Gilead Sciences Inc. $(GILD)$, Moderna Inc. $(MRNA)$, Block Inc. $(SQ)$, Molson Coors Beverage Co. $(TAP)$, Microchip Technology Inc. $(MCHP)$, Yeti Holdings Inc. $(YETI)$ and Airbnb Inc. $(ABNB)$ also report.
The calls to put on your calendar
Weight loss drugs, from multiple angles: Two things that wellness platform Hims & Hers Inc. $(HIMS)$, CVS Health Corp. $(CVS)$, drug distributors Cencora Inc. $(COR)$ and McKesson Corp. $(MCK)$, Planet Fitness Inc. (PLNT) and weight-management platform WW International Inc. $(WW)$ all have in common? They're all trying to get a handle on GLP-1 drugs - a class of medication that includes weight-loss drugs like Ozempic and Wegovy - and they all report earnings this week. Those companies are benefiting, or trying to benefit, from the rise of those drugs, or they're being challenged by them. Taken together, whatever executives say about those drugs will offer more detail on the ways they're changing how people think about their health.
The numbers to watch
Media outlook, election impact: Donald Trump's surprise election in 2016 gave the biggest news outlets a lift, as investors and audiences braced for escalating drama in the White House. In 2020, for some of those outlets, pandemic anxieties translated to a bump in subscribers, and management at the New York Times Co., a few months after that year's election, said engagement was still pretty high.
When the New York Times $(NYT)$ and other news companies report this week - the others being Fox News parent Fox Corp. $(FOX)$, and News Corp $(NWS.AU)$, the parent company of MarketWatch and the Wall Street Journal - we could get some sense of whether those trends might continue this time around, as the gap between the largest media companies and smaller, struggling local ones stays wide.
Elections, as massive political events, tend to drive reader interest, and the Times and other news outlets have tried to find ways to get audiences to stick around afterward. Along with expanding coverage within its news apparatus, the Times, for instance, also offers access to games and recipes. And last week, Gannett Co. Inc. $(GCI)$, which owns USA Today and local news organizations, said most unique visitors this year had been coming by for reasons unrelated to politics.
Still, Fox Corp. in August, when asked about political ad spending, said that factoring out a runoff in Georgia, "we would expect a record political cycle this year." And News Corp, which also owns the book publisher HarperCollins, also noted at that time that JD Vance's "Hillbilly Elegy" had seen a "resurgence of interest," selling 150,000 copies within 24 hours after Vance was announced as Trump's running mate.
In July, the company added, the book sold 877,000 units, which would help News Corp.'s fiscal first-quarter results.
-Bill Peters
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(END) Dow Jones Newswires
November 03, 2024 10:01 ET (15:01 GMT)
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