We are into the heart of earnings season and a few companies reported today that are solid bellwethers for the economy. There are positive signs of momentum so I wanted to highlight a few:
Matt Flannery, President & CEO, United Rentals
- On overall demand and the year ahead: "The momentum we're carrying into our busy season, along with our customers' feedback for their business, supports our expectations that this will be another record year"
- "Our construction end markets saw strong growth led by nonresidential construction and infrastructure. And on the industrial side, power and mining and minerals were notable standouts, with power continuing to post double-digit growth"
The company boosted its guidance and shares are up 23%. Total revenue is now expected in the range of $16.9 billion to $17.4 billion, an increase of $100 million versus our initial guidance.
Robert Isom, CEO, American Airlines
- On overall demand: "Demand for American's product continues to grow, and during the quarter, we recorded the 9 highest revenue intake weeks in our history"
Devon May, CFO, American Airlines
- On Q2 demand: "Demand across all cabins and entities remains robust. We expect domestic unit revenue to grow more than 10% in the second quarter"
Nat Pieper, Chief Commercial Officer, American Airlines
- On a structural shift in consumer spending: "Is there a long-term resetting in terms of consumer spending hierarchy. There's a lot -- we all remember revenge travel from COVID and people got tired of buying TVs and wanted to go see the world. And I think some of that has continued and extended"
Note that American Airlines is more consumer focused and less focused on businesses and affluent customers than United or Delta so it's a sign that the middle class is doing well. Shares are up 5% on a tape that otherwise has airlines lower. The comments on demand highlight that it's holding up (so far) despite big fare hikes due to the Iran war. I also think the shift in consumer spending is secular and -- in part -- driven by retiring baby boomers.
Bob Jordan, President & CEO, Southwest Airlines
- On demand breadth: "Demand remained strong across geographies, customer segments and both business and leisure"
- "There is significant economic and geopolitical uncertainty, and it's not possible to know with confidence all the ways the industry could be inactive"
- "You cannot predict at what point consumers and demand is going to be -- you're going to begin to see demand destruction based on the pricing environment"
Andrew Watterson, COO, Southwest Airlines
- On broad-based demand strength: "We are seeing extraordinarily strong fares and strong demand across the entire network across all customer segments across different travel types"
The tone from Southwest was a bit more cautious than American going in (American is seen as a perpetual laggard) and shares are down 2.5%
Steve Squeri, Chairman & CEO, American Express
- On overall spending momentum: "Card Member spending grew 10% on a reported basis, and this is the highest quarterly growth in 3 years, driven by strong growth across both Goods & Services and T&E"
Christophe Le Caillec, CFO, American Express
- On broad-based spending: "Retail spending kept up its momentum, up 11% FX adjusted, and spending at luxury retail merchants was up 18%, reflecting the continued strength of our premium customer base"
- "We did see airline growth softened in the last few weeks of March and into April, driven by travel disruptions from the Middle East conflict"
- "If you had asked me a few years ago, where are the balances going to come from? Where are the account is going to come from? I would not have told you that I'm confident it's going to come from the younger cohorts. And -- but that's what we're seeing"
- "Credit performance remains very strong and stable. Delinquency rates were flat to last quarter while write-off rates were slightly down"
There are definitely some K-shaped vibes here and maybe the airlines aren't telling us something about forward demand. Overall, AXP skews wealthy so it's not the best barometer but this looks good and that's exactly what we saw in Monday's US retail sales report. Shares of AXP are down 4.4% today after opening flat.
Maryclare Kenney, Chief Commercial Officer, CSX
- On end-market headwinds in housing and autos: "A lot of our business is tied to housing and automotive, and those markets have been pretty bleak... auto production still right now is forecast to be down about 2% this year"
- "When you think about the housing side, it's affordability issue. Interest rates are still high, and they've bounced back up a little bit after everything that's happened in the Middle East"
Haviv Ilan, CEO, Texas Instruments
- On the broader semi recovery: "The overall semiconductor market recovery is continuing and we remain well positioned with inventory and capacity that allows us to support our customers with competitive lead times through the cycle"
- On breadth of the industrial rebound: "Industrial increased more than 30% year-on-year and was up more than 20% sequentially, growing broadly across all sectors and regions"
- On industrial demand signals: "It's now 5 or 6 months of continued growth in industrial... It's the first quarter where we saw the broad market, basically the tail starting to wake up again after a long hibernation period"
- On China auto softness vs rest of world: "China was — the overall quarter was flat sequentially. But China was down. The rest of the world was up"
Shares of TXN are up 20% on the print.
Overall, we're starting to see some weakness creep into equities with the S&P 500 now down 0.3%. Yesterday I wrote this and I think it's worth a read: The foundations of this stock market rally are iffy
