Friday, October 19, 2018

Quote of the Day: This Is What We're Talking About!

We recently (multiple times) cited the risk to forward earnings outlooks due to U.S./China trade relations as being a huge near-term headwind.

The following is what we're talking about: 
 emphasis mine...
"Caterpillar, Boeing Sell Off After Honeywell's Tariff Comments
(Bloomberg) -- 
Two of the most followed trade proxies in the market, Caterpillar and Boeing, are among the weakest in the Dow Jones today, potentially after cautious tariff commentary from Honeywell’s earnings conference call. The company’s executives are bracing for “hundreds of millions of dollars” in earnings pressure next year from the expanded tariff lists.
Caterpillar and Boeing dropped more than 1 percent while the Dow rose 0.5 percent. Both companies report earnings next week.
Here’s what Honeywell said about China and tariff impact:
  • "While we’re hopeful there is ultimately resolution to the situation, we’re planning for the worst and making structural changes including modified some sources of supply, seeking alternative sources and taking other commercial actions as necessary to position us for 2019 and beyond."
  • "We expect the impact to be minimal and manageable in 2018 as we previously discussed, but now we anticipate that the impact of 2019 prior to mitigation actions will be significant."
  • "It’s our expectation that we’ll be able to effectively manage the situation and still deliver strong results as we have done through 2018 though as you know this will put some pressure on margin rate expansion.""
Which explains why the headline we quoted earlier this morning sparked a strong pre-market bounce in equities...

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