The impact on earnings from the slowdown in China and the ongoing trade war is not uniform.
Halfway through the earnings season, company reports show the much-feared collapse in guidance for the second half has not happened. But the consensus assumes there will be no additional tariffs or a more significant acceleration in the economic slowdown in China.
"Guidance overall has been more upbeat than we anticipated, especially given the macroeconomic backdrop and trade concerns," Lindsey Bell from CFRA Research said in a note to clients. In some cases, tariffs and other additional costs are being passed on to customers, in others, not.
Bell noted it would be prudent for investors to consider this risk of additional tariffs. "We believe trade tensions could flare up at any time given the strength that both sides have exhibited to stick to their guns in the past," he wrote.
The overall picture around the slowing global economy and trade and tariffs is complicated, partly due to changes going on within China itself.
"It really comes down to Old China versus New China or Manufacturing PMI versus the Non-Manufacturing and Service PMIs," Brendan Ahern told me. Ahern runs Kraneshares, a China ETF provider.
He notes consumers are still generally strong. Coca-Cola, for example, saw growth in Asia-Pacific, but Ahern also noted that industrial businesses like autos have been weak.
"Bellweathers for global trade, like Singapore and South Korea, are showing some weakness," he told me, noting that trade uncertainty may also be affecting capital expenditures.
Here are comments about China and global trade from companies that have recently reported earnings.
LVMH: The world's biggest luxury goods maker said, "Demand remained very strong in the United States and in Asia, particularly China, which reaffirmed its status as the second-largest market for the Wines & Spirits business group." It also said: "The Perfumes & Cosmetics business group saw significant revenue growth in Asia, particularly in China."
Texas Instruments: Reported earnings better than expected and guided higher for the third quarter than analyst expectations. Regarding China, which is accountable for 40% of its revenues, the company said it had seen growth in 5G products, but that overall, "We didn't see anything unusual this quarter."
MMM: Strength in Health Care, Transportation and Electronics. Significant decline in automotive.
Rockwell Automation: Stimulus efforts in China helping mass transit and water projects, automotive weak.
Caterpillar: Reported an earnings miss and hinted toward the lower end of previous guidance, citing both weakness in its U.S. oil and gas business and weakness in China, notably a 22% sales decline in the Asia-Pacific construction business. The company said the decline was due to competitive pressures in China.
Align Technologies: The maker of Invisalign dental products saw lower shipments to China than expected, citing a tougher consumer environment and more competition.
Las Vegas Sands: Cash flow from Las Vegas properties was higher than expected, but Macau (China) was lighter than expected. Executives noted some contraction in the VIP business in Macau.