This Week in Earnings – Q1'25
The Sector Beat: U.S. Banks
It’s been a sprint here at Corbin as we support you, our valued clients, in navigating the choppy terrain this earnings season, and soundboard on effective investor communication strategies tailored for your company’s situation. While we will all feel the affects the tariff impacts and trade wars — directly or indirectly — each company has its unique set of challenges (and opportunities). We appreciate the #TRUST (one of our core values) you have in us, and are here for you as we seek to build management credibility through thoughtful transparency and capture investor mindshare and wallet share.
In case you missed it, you can access the link below for a replay of our webinar The Big So What® – Q1’25 Earnings Season. Thank you to all who attended the session live and submitted questions!
WEBINAR
Q1’25 Earnings Season
In case you missed it, you can access a replay of our webinar The Big So What® – Q1’25 Earnings Season. Thank you to all who attended the session live and submitted questions!
In today’s thought leadership, we cover:
- Key Events this week
- Guidance Trends Post April Tariff Announcements
- Tariff Communications & Downturn Playbook
- The Sector Beat – U.S. Banks which provides valuable insight on the economic picture, as well as the global lending and deal environment – in two words …”no bueno”
Key Events
Tariffs
- President Trump, late last Friday, announced tariff exemptions on smartphones, computers, and other electronics, most of which are sourced from China. These exemptions are considered temporary, and Commerce Secretary Lutnick on Sunday said they would be included in coming semiconductor tariffs, “probably in a month or two.” (Source: Reuters, ABC News)
- China on Wednesday signaled willingness to resume trade talks if the U.S. demonstrates respect and appoints a designated negotiator. Meanwhile, The White House on Wednesday clarified that “China now faces up to a 245% tariff on imports to the U.S.” (Source: Bloomberg, Yahoo Finance)
- High-level meetings between the EU and U.S. this week yielded minimal progress. EU Trade Chief Maros Sefcovic left Washington with little clarity on the U.S. position, and U.S. officials indicated that the 20% reciprocal tariffs, which have been reduced to 10% for 90 days, would not be removed. (Source: Bloomberg, NBC News)
Retail Sales
- U.S. Retail Sales rose 1.4% in March, better than the 1.3% increase expected by economists. The March increase marked the largest gain since January 2023 as households stepped up purchases of vehicles and a range of other goods to avoid higher prices from tariffs. (Source: Commerce Department, Reuters)
Labor Market
- U.S. initial jobless claims for the week through April 12 totaled 215,000, down from 224,000 a week earlier and lower than expectations of 225,000. Applications for unemployment benefits fell to the lowest level in two months, consistent with a stable labor market. Continuing claims for the week through April 5 totaled 1.885M, up from 1.844M in the prior week above expectations of 1.872M. (Source: Labor Department)
Central Banks
- Federal Reserve Chair Jerome Powell, speaking at the Economic Club of Chicago on Wednesday, said tariffs are significantly higher than the central bank expected, noting that there is a “strong likelihood” that the economy will be moving away from both of the Fed’s goals for the “balance of the year, or at least not making much progress.” (Source: Federal Reserve, Yahoo Finance)
- The Bank of Canada held its policy rate steady on 2.75% on Wednesday, pausing after seven consecutive rate cuts. Bank of Canada Governor Tiff Macklem noted tariffs could cause a deep recession, while the central bank’s Monetary Policy Report presented two scenarios for U.S. trade policy. In the first scenario, uncertainty is high, but tariffs are limited in scope and Canadian growth weakens temporarily. In the second scenario, a protracted trade war causes Canada’s economy to fall into recession. (Source: Bank of Canada)
- The ECB lowered its key interest rate by 25 bps to 2.25% on Thursday, as widely expected. The move marks the central bank’s seventh rate cut in the last eight meetings, taking the policy rate to the lowest level since early 2023. ECB’s rate statement noted “the outlook for growth has deteriorated owing to rising trade tensions”. (Source: European Central Bank, WSJ)
Guidance Trends Post April Tariff Announcements
In light of the uncertain trade policy backdrop in the wake of President Trump’s April 2nd reciprocal tariff announcement and subsequent 90-day pause announced on April 9th, we have been fielding more questions from our clients about guidance treatment and investor expectations and whether companies will be expected to include tariff impacts in updated outlooks or potentially augment or withdraw annual guidance policies.
While still early in the Q1’25 reporting season, we have been closely monitoring earnings for any shifts in guidance. To date, Delta stands as the only U.S. company with a market cap of more than $1B to have Withdrawn annual guidance due to the uncertain policy backdrop. Among larger international firms, Swiss-based computer hardware company Logitech also withdrew its 2026 forecast citing continuing uncertainty in the tariff environment.
Delta Air Lines ($26.8B) – April 9, 2025
- Press release: “Given current uncertainty, Delta is not reaffirming full-year 2025 financial guidance and will provide an update later in the year as visibility improves.”
- Earnings call prepared remarks: “With broad economic uncertainty around global trade, growth has largely stalled. In this slower-growth environment, we are protecting margins and cash flow by focusing on what we can control. This includes reducing planned capacity growth in H2 of the year to flat over last year while actively managing costs and capital expenditures. We expect June quarter profitability of $1.5 to $2B. Given the lack of economic clarity, it is premature at this time to provide an updated full-year outlook.”
In contrast, United Airlines chose not to withdraw annual guidance when it reported this week, but instead provided two scenarios dependent on macroeconomic conditions. The company maintained its FY guidance given a “Stable Environment”, while including a lower EPS guidance range for a “Recessionary Environment” scenario.
United Airlines ($22.0B) – April 15, 2025
- 8-K filing: “The Company’s guidance is based on consensus market macroeconomic expectations. However, a single consensus no longer exists, and therefore the Company’s expectation has become bimodal – either the U.S. economy will remain weaker but stable, or the U.S. may enter into a recession. The Company is therefore providing two separate guidance benchmarks based on these two different macroeconomic views.”
In addition, of the 42 S&P 500 companies that have reported earnings since the April 2 tariffs announcement, 21 have Reaffirmed annual guidance (important to note, Financials comprise 14 of these 21) while 2 companies have Raised and 7 have Lowered.
We will continue to track guidance trends as the earnings season ramps and will be providing updates in the days and weeks ahead.
Tariff Communications & The Downturn Playbook
Given the increasingly uncertain macro environment — with more analysts lowering 2025 earnings estimates for the S&P 500, cutting year-end price targets, and highlighting a wide range of potential outcomes — it’s important to remember that investors are well aware of the challenging environment and aren’t expecting companies to guide with absolute certainty. Further, while clearly different situations, we see a lot of parallels to the COVID-19 onset when companies leaned into proactively and transparently communicating with investors so as to bring them along.
In our recent Commencing the Quarter thought leadership piece, we included a Pulse Poll to gather investor perspectives following the April 2nd reciprocal tariffs announcement; you can access the report here for key findings along with strategic communication recommendations for navigating the upcoming earnings season.
With all this in mind, we suggest dusting off your downturn playbooks accordingly, with a focus on the levers at your disposal to control expenses while maintaining optionality should the macro picture improve. Importantly, you may not be at the point in time where you feel comfortable communicating your full approach, but note that you will likely be asked about it. Having a methodical response that demonstrates foresight, humility, and process is recommended, as is preparing the organization to act with agility in the event footing slips quicker than anticipated.
To help effectively land this communication approach and build trust with the Street, here are slide examples:
Tariff mitigation actions
Be clear about your expected exposures and proactive steps being taken to mitigate the impact
Williams-Sonoma, March 2025 Investor Presentation
Tariff impact disclosures
Highlight areas that may be less at risk (e.g. USMCA-compliant exemptions), while providing transparency into areas that may be more impacted
ICU Medical, April 2025 Investor Presentation
Scenario analysis
Outline expected business performance and operating approach under a range of scenarios (i.e., base, best, and worst case)
Stanley Black & Decker, Q4’24 Earnings Presentation
Huntington Bancshares, February 2025 Investor Day
Prior downturn performance
Highlight business performance through COVID-19, the GFC, etc. and how the business is positioned today and expected to perform
Keysight Technologies, 2023 Investor Day
Hilton Grand Vacations, March 2025 Investor Presentation
Expense Levers
Outline cost control levers and what is fixed vs. variable, including actions such as reducing executive compensations or furloughing vs layoffs to maintain optionality
MSCI, March 2025 Investor Presentation
Margin protection
Demonstrate ability to maintain/protect margins though volatile economic environments
APi Group, February 2025 Investor Presentation
Surcharge
If company-wide trade surcharges are necessary, consider issuing a press release including timing and rationale
Ecolab Press Release, April 16, 2025
As we’ve noted before, balancing this with messaging around confidence and durability is critical. If you are not yet seeing any impact, say that, but be cognizant of the current environment and risks on the horizon to avoid coming off as tone deaf.
The Sector Beat: U.S. Banks
Big Banks kicked off Q1 earnings season with most delivering solid results on the top- and bottom-line, continuing their recent trend. That said, executives struck a notably cautious tone, flagging recent market volatility and warning of slowing deal activity amid ongoing trade and economic “turbulence”. Further, the animal spirits that buoyed outlooks last quarter have largely dissipated, with expected tailwinds from a more pro-growth agenda from the White House (i.e., tax cuts, deregulation) pushed further out, and execs framing that the start of Q2 is a “markedly different operating environment” than at the start of the year.
That said, commentary from bank executives suggests that despite tariff concerns and waning consumer sentiment, the U.S. consumer remains resilient, albeit exhibiting some notable shifts in spending patterns. JPMorgan pointed to signs of front-loading in areas expected to see price increases from tariffs, while Citi highlighted a move toward essentials away from travel and entertainment.
Regarding the deal environment, executives note corporate clients remain engaged, but that tariff turmoil has shifted priorities away from longer-term strategic initiatives toward short-term mitigation efforts and supply chain adjustments. However, most maintain that backlogs and strong pipelines suggest an eventual pickup once clients gain clarity, with deals being “paused” not “deleted”.
Against this backdrop, banks remain focused on disciplined expense management, while still prioritizing investments around automation and AI-driven efficiencies. Taken together, after a mostly solid start to the year, banks exhibit a more cautious stance heading into Q2, noting clarity on the tariff landscape likely won’t be reached for some time.
Key Findings
Macroeconomic Outlook
Notable Shift to Concern, Owing to Policy Shifts, Global Tensions, and Unclear Growth Trajectory
- JPMorgan ($658.2B): “The economy is facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and ‘trade wars,’ ongoing sticky inflation, high fiscal deficits and still rather high asset prices and volatility. As always, we hope for the best but prepare the Firm for a wide range of scenarios.”
- Bank of America ($288.8B): “Our research team, like many research teams, does not currently believe we’ll see a recession in 2025. However, they’ve lowered their GDP growth rates for 2025 and continue to see no rate cuts during 2025, but expect, as inflation gets under control, you may see them in the future, i.e., in 2026.”
- Wells Fargo ($211.6B): ”We support the Administration’s willingness to look at barriers to fair trade to the U.S., though there are certainly risks associated with such significant actions, and we see concern playing out in the markets and the economic uncertainty that now exists. Timely resolution, which benefits the U.S., would be good for businesses, consumers, and the markets. Our current expectation is that we will face continued volatility and uncertainty, and we are prepared for a slower economic environment in 2025, but the actual outcome will be dependent on the results and timing of policy changes.”
- Morgan Stanley ($171.4B): “Markets are exhibiting the kind of overnight and intraday volatility that reflect rapidly changing probability assessments of different policy outcomes. Economists are telling us the risk of recession has materially increased, but consensus today is softer, not negative, growth. Inflation, meanwhile, continues to swing between declining and sticky. The simple truth today is that we do not yet know where trade policy will settle, nor do we know what the actual transmission effects will be on the real economy. Given this unpredictability, some clients are deferring strategic activity, while others are proceeding. Importantly, core segments of our client universe are continuing to engage.”
- Goldman Sachs ($156.8B): “We are entering the second quarter with a markedly different operating environment than earlier this year. Our economists’ expectation for growth in the U.S. has fallen meaningfully from over 2% to 0.5%.The prospect of a recession has increased, with growing indications that economic activity is slowing down around the world.”
- Citigroup ($116.9B): “While our corporate and consumer clients are resilient and in good financial health,the world is in a wait-and-see mode and is facing a more negative macro outlook than anyone had anticipated at the beginning of the year. And we know that prolonged uncertainty generally hurts confidence. The changes underway globally will go beyond trade and tariffs. In the U.S., for example, regulation and tax policy are all likely to look different in a year’s time, and these changes will not only have economic impacts, but geopolitical and cultural ones as well.”
- PNC ($60.4B): “As you know, the proposed tariffs on April 2 were more severe than anticipated. If these tariffs are implemented as proposed and remain in effect for an extended period, it’s quite possible the probability of a recession will go up. We’re actively assessing our portfolios and analyzing a wide range of factors, both positive and negative, that could impact our commercial and consumer exposures. However, we view the current environment is too fluid to reasonably change our estimates at this time.”
- Bank of New York Mellon ($56.1B): “Reflecting on the operating environment, while there were clear signs of optimism at the beginning of the year, we have now seen a rapid and significant reversal of sentiment driven by uncertainty about trade and fiscal policies, which added to existing tail risks, including a variety of geopolitical tensions and conflicts. Last week’s tariff announcements were clearly part of a broader strategy and an effort to reset trade relations between the U.S. and the rest of the world. This is an attempt at a very fundamental change, and while last week’s announcements provided an initial baseline, we should expect that negotiations will take time, and it is likely that a clear final picture won’t be reached for a while, a view reemphasized by Wednesday’s news on a 3-month pause and the market volatility we saw again yesterday. The read-through of this uncertainty into both capital markets and the real economy creates elevated risks in the near and medium term.”
Consumer Health
Resilience Holds Up in Q1 with a Certain Amount of Front-Loading Driving Up Spend while Lower-Income Segments Remain Pressured; Consumer Not at Levels of “Distress”
- JPMorgan ($658.2B): “On the consumer side, the thing to check is the spending data. And to be honest, the main thing that we see there would appear to be a certain amount of front-loading of spending ahead of people expecting price increases from tariffs. Ironically, that’s actually somewhat supportive, all else equal. What I highlight is that during this transitional period and this elevated uncertainty you might see some distortions in the data that make it hard to draw larger conclusions…it is true that it is relatively weaker in the lower income segment. But when you take a step back and you ask, ‘are we seeing signs of distress in the lower income segment?’ the answer is no. Some of the increases in spending that we’re seeing in April are actually coming from the lower income segment. So, no evidence of distress.”
- Bank of America ($288.8B): “We note that some retailers may say that their sales are slower and others are picking up, and it really reflects the change in consumer spending behavior. Butin the aggregate, the consumer keeps pushing money into the economy. As we look at our business side and what our business clients are telling, in the current setting, they remain profitable, liquid and have strong results.”
- Wells Fargo ($211.6B): “Consumers have remained resilient and debit and credit card spending patterns have remained stable. More affluent customers continue to show strength, while less affluent customers show more stress. Consumer credit also continues to perform well. Delinquencies appear to have leveled at historical norms and payment rates on unsecured portfolios have been quite strong.”
- Citigroup ($116.9B): “The consumer continues to be resilient and discerning in their spend. In fact, we did see spend hold up in Q1, and we saw spend actually increase in our branded card portfolio up about 3%. We’ve seen a shift towards essentials and away from travel and entertainment.”
- Bank of New York Mellon ($56.1B): “If you’re a consumer, [there is a] fear of ‘are prices going to go up, what’s it going to mean?’ There is also a jobs angle on all of this. Could the economy tip into a recession? Those are all legit questions that a consumer would have, and that’s going to be a little bit of a dampener of confidence. So, there are plenty of reasons to think that that [confidence] will continue to be low.”
- M&T Bank ($26.0B): “With the consumer, from just looking at our debit card activity, our spending patterns are still pretty much intact, so we’re consistent. We are seeing, and it could just be short-lived, but in our indirect channels on the consumer side, a lot of loan volume coming in auto, marine, and RV. Maybe people are rushing before higher prices. But the bottom 20% of consumers has been struggling for the last several years and will probably continue to struggle.“
Business Activity & Deal Environment
Tariff Turmoil Puts Deals on Ice as Clients Prioritize Mitigation Steps; Execs Tout Strong Pipelines and Continued Engagement, Anticipating a Rebound When Clarity Improves
- JPMorgan ($658.2B): “In terms of our corporate clients, they’ve been reacting to the changes in tariff policy. At the margin, that shifts their focus away from more strategic priorities, with obvious implications for the investment banking pipeline outlook, towards more short-term work, optimizing supply chains and trying to figure out how they’re going to respond to the current environment. As a result, we would characterize what we’re hearing from our corporate clients as a little bit of a wait-and-see attitude. It’s hard to make long-term decisions right now.”
- Wells Fargo ($211.6B): ”With the volatility that we’ve seen over the last two weeks, it’s going to be hard to see much activity in the equity capital market space until that calms down a bit. I do expect you’ll continue to see good activity in debt capital markets. And then M&A, the conversations are good. The pipeline is good. It’s going to be dependent on when people start to get a little bit more certainty around the policy adjustments that are being made and how that’s going to impact their business.”
- Morgan Stanley ($171.4B): “While tariff announcements and subsequent market volatility has disrupted near-term deal activity, our pipelines have not meaningfully changed since the beginning of the year and remain robust. Therefore, while the timing of the deal execution remains sensitive to market conditions, there remains demand for strategic advice and capital raising…We can’t make a call on where the markets are going to be a week from now. There is increased uncertainty, so any strategic transaction is by definition going to get a harder look. What I’m trying to underscore here, is that largely what we’re seeing is some folks still going, but the others pausing. They’re not deleting, they’re pausing.”
- Goldman Sachs ($159.5B): “In investment banking, the volatile backdrop led to more muted activity relative to the levels we had expected coming into the year. But it is especially in environments like this the clients come to Goldman Sachs for help with their most important strategic decisions. As we stand today, our client dialogues remain elevated, and our backlog is up for the fourth consecutive quarter. That being said, our ability to execute on these transactions will of course be dependent on market conditions.”
- Goldman Sachs ($156.8B): “The administration’s focus on trade barriers and strengthening the U.S. competitive position is commendable. At the same time, it is important to recognize that few [countries] have benefited more from a post-World War II economic and financial order than the U.S. This doesn’t mean meaningful reform in certain areas is not warranted.”
- Citigroup ($116.9B): “I would say that most clients are pausing their plans. No one is taking bets in the market right now. We’re seeing them prep for more headwinds. So, we’re seeing some bolstering of already strong balance sheets. Remember, our client bases aren’t the smaller companies and the mid-market that are going to get more pummeled in this type of environment. So, our clients are getting ready. We’re seeing some accelerating of imports to stockpile inventories. We are seeing a pausing on significant CapEx, while everyone waits to get clarity on the full agenda. And in that full agenda, remember this tax bill, those deregulation actions, these are some positives that will be coming. It’s a very big agenda, clients appreciate it’s going to take time.”
- M&T Bank ($26.0B): “Business-wise, our customers actually really wanted to make a lot of investments. They want to do acquisitions, but they are just really on pause right now. And it’s lack of confidence. They don’t know what the rules of the road are right now. Things keep changing in D.C., and until that settles out a little bit, they’re going to be on hold.”
Loan Growth / Demand
Stable but Not Accelerating; Constrained More by Uncertainty than by Fundamentals, Businesses Remain Healthy but Cautious, and Longer-Term Structural Trends – e.g., Reshoring and Regional Migration – are Tailwinds on the Horizon
- JPMorgan ($658.2B): “In our soundings of our wholesale clients during the moments of peak uncertainty, we did hear them talking about wanting to focus on shoring up liquidity. Interestingly, I asked the question a day ago, whether we were seeing meaningfully observable draws from clients, and the answer was no, at least not yet. So, I don’t know what to make of that, but perhaps it suggests that we do not see that level of heightened anxiety, that people are more just focusing on addressing their supply chain issues right now.”
- Wells Fargo ($211.6B): ”While overall loan growth was modest, we’ve seen pockets of increased loan demand from our commercial clients, resulting in modest growth in commercial loan balances from Q4. All of this points to the strength of our customer base through the end Q1. Everyone is trying to assess the situation in terms of will there be a resolution to some of these things. Business hasn’t come to a halt in any way at this point, but people are certainly taking stock of what it means, figuring out where to sit and wait, and where to continue to move forward. I think there is still a hope that the positives of deregulation, positives of tax reform, the long-term positives of changes in trade, can put us in a position to feel better about the future and a growing economy. But people are cautious. I put it in the wait-and-see category – cautious in the shorter term, but probably still bullish for the longer term.”
- PNC ($60.4B): “We were encouraged by the increase in the outstandings through the quarter. And when you look in our financial supplement, you’ll see it was pretty broad based across most of our loan categories. We had been calling for this for some time in terms of increased utilization, which we saw in the quarter. So that tracks to what we thought at the beginning of the year. As far as is some of this defensive or are these tariff driven, it’s hard to say. It’s not all of it, for sure. Maybe there’s a little bit of it in there. But generally speaking, we didn’t see massive growth or a massive shift. So 80 on the utilization isn’t huge, but it was in line with gradual normalization.”
- Pinnacle Financial Partners ($7.3B): “I do think there is an expectation that you’re going to reshore, you’re going to have increased manufacturing and so forth. The question is when is that going to get here? When we get beyond uncertainty, my expectation is that we’re going to get outsized job growth [in the southeast], which will translate into increased financing opportunities.”
In Closing
Overall U.S. bank commentary reflects a marked downshift from the largely upbeat tone executives expressed at the start of the year, with tariffs and heightened uncertainty clearly weighing on sentiment and business activity. While the 90-day pause on Trump’s reciprocal tariffs for most countries — with the notable exception of China — was a welcomed development, only time will tell how trade talks will unfold, and the prospect of negotiating deals with major U.S. trading partners in 80+ days remains ambiguous.
We can hope for greater clarity in the days ahead — but as the saying goes, hope is not a strategy. With earnings season now underway, investors are squarely focused on what companies will be saying about tariff impacts, mitigation strategies, and how the uncertain backdrop affects outlooks for the year ahead. And there will be impacts, much deeper and far-reaching than anyone can ascertain based on what we know today. We should all be eyes wide open about the “subtraction by distraction” impact the current environment is and will have on productivity and decisions.
This is the time to scenario plan in preparation for agile execution. This is the time to lean into employee engagement and help them feel more connected. This is the time to build credibility with investors through clarity and candor in your communications.
As noted in our Q1’25 Commencing the Quarter, a one-size-fits-all approach to earnings communication and guidance positioning simply doesn’t work in this environment. We’ll continue tailoring our recommendations based on each client’s unique circumstances and context. While we’ve spoken with many of you, we’re only an email or phone call away if you want to soundboard on strategies. We’re a cycle tested team and have developed proven approaches to navigate this type of terrain.
Up next week: Industrial Sentiment Survey® Recap and the Industrial Sector Beat.