This Week in Earnings – Q1’25

This earnings season, executive views remain mixed with many continuing to navigate a challenging operating environment. Despite many pointing to solid Q1 performance, commentary on the year ahead is decidedly cautious with outlooks clouded by macroeconomic uncertainty and evolving trade policy backdrop. Against this backdrop, executives are preparing for a range of possible outcomes, leading to some offering wider guidance ranges than usual.

Demand trends are mixed across end markets. Areas tied to residential construction, autos, and discretionary retail remain under pressure, while certain pockets including data center infrastructure and packaging for consumer essentials exhibit signs of strength. Executives largely downplayed signs of customers pre-buying ahead of tariffs being implemented.

As has been the case throughout earnings season, tariff commentary featured heavily on calls with companies pointing to mitigation steps and potential offsets. To that end, while many across the sector anticipate minimal direct impact from tariffs, citing localized supply chains and potential pricing actions, executives widely expressed greater concerns around secondary tariff impacts and potential knock-on effects to demand and inflation.

Bracing for a potential downturn, companies are tightening their belts, ramping up cost reduction plans, dialing back capex forecasts, and delaying big investments to provide flexibility amid the uncertain outlook for the second half.

Globally, views are mixed and colored by industry. In Europe, Dow is idling three additional upstream assets due to subdued demand, while Linde noted no meaningful improvement in industrial activity. Others in the chemicals industry pointed to further destocking weighing on volumes. Conversely, others are benefitting from strong market fundamentals – for instance Crown Holdings pointed to expectations for a strong summer season in North America and Europe for canned beverages, with Europe also exhibiting signs of accelerations in the shift from plastics to cans. Broadly, commentary also reflects some signs of green shoots in China, with Latin America stable to improving.

Key Themes

• Macro and Outlook – Lean Inventories and Extended Destocking Fuel Caution; Tariff Volatility Prompts Planning for “Multiple Scenarios”
• Tariffs – Executives Quantify Direct Tariff Impacts and Underscore Manageability through Working with Vendors, Supply Chain Shifts, Cost Offsets, “Surcharges”, and “Local for Local” Strategies; Note Greater Concern with Knock-on Effects to Demand, Pricing, and Ultimately Inflation
• Mixed Demand Signals – Softness Exhibited Across Auto, Construction, and Discretionary Retail; AI-driven Infrastructure, Electronics, and Packaging for Essentials Relative Bright Spots; Execs Acknowledge Some Signs of Pre-buying ahead of Tariffs
• Around the World – Latin America Seeing Strength, While Europe Shows Signs of Recovery as China Shifts Its Supply Chain Away from the U.S.
• Expense Management – Capex Cuts and Cost-saving Initiatives – Including *NEW* Headcount Reductions – Ramp Up as Execs Contend with Demand Uncertainty