Zacks Earnings Trends Highlights: United Air Lines, A.O. Smith and 3M
Chicago, IL – May 1, 2025 – Zacks Director of Research Sheraz Mian says, "This earnings season is less about what companies earned in the first quarter of 2025 and more about sizing up the earnings impact of the uncertain macroeconomic backdrop."
Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
Total Q1 earnings for the 256 S&P 500 members that have reported results are up +14.0% from the same period last year on +4.0% higher revenues, with 72.3% beating EPS estimates and 62.1% beating revenue estimates.
We continue to believe that this earnings season is less about what companies earned in the first quarter of 2025 and more about sizing up the earnings impact of the uncertain macroeconomic backdrop. This is starting to show up in declining estimates for the coming periods.
For 2025 Q2, total S&P 500 earnings are expected to be up +7.0% from the same period last year on +3.8% higher revenues. Estimates for the period have been coming down in a notable way, which aligns with the negative trend we experienced before the start of the Q1 earnings season.
Estimates for full-year 2025 have also been coming down meaningfully in recent weeks, particularly since about mid-February, with estimates for 14 of the 16 Zacks sectors getting cut. Sectors suffering the most significant cuts include Energy, Tech, Finance, and Medical. Estimates have moved up for the Construction and Aerospace sectors.
Uncertainty about the overall macroeconomic picture continues to be a significant drag on the earnings outlook as a whole, prompting analysts to cut their estimates for the current and coming periods.
This uncertain environment makes it difficult for companies to provide explicit guidance for the coming periods. We had noted here how United Air Lines UAL had provided a two-pronged outlook, with one guidance a reiteration of their existing outlook and the second describing the earnings impact of a recessionary backdrop.
Since then, A.O. Smith AOS and 3M MMM followed United Air Lines' lead by reiterating its outlook for the year, but 3M also provided a tariffs component that will potentially weigh on full-year EPS in the -2.5% to -5% range. A.O. Smith appears to have used price increases to offset the potential tariff impact that allowed it to maintain existing guidance. Many others have struggled with providing explicit guidance, for understandable reasons.
We are starting to see this in the revisions trend both for the current period (2025 Q2) and full-year 2025.
The emerging negative revisions trend appears to be broad-based, with Aerospace and Construction as the only sectors experiencing modest positive revisions.
Of the sectors suffering negative estimate revisions, the case of the Tech sector is particularly significant as this sector had thus far been enjoying a very favorable revisions trend for more than a year now.
For 2025 Q2, the Tech sector is currently expected to bring in +11.7% more earnings relative to the same period last year. This growth expectation is down from +14.2% on April 2nd. For full-year 2025, the expectation is for sector earnings to increase by +11.3% from the 2024 level, a decline from the +12.1% growth expected on April 2nd. We should note, however, that estimates have modestly inched up again over the past few days.
While estimates for this year have started coming down lately, there haven't been a lot of changes to estimates for the next two years at this stage.
Given all-around worries about the economy's growth momentum, it is reasonable to expect these estimates to be lowered further in the days ahead as the tariffs impact starts showing up in data. The modestly negative GDP read for the first quarter of the year primarily reflected the anticipatory effects of the trade regime, with importers stocking up on supplies ahead of the new levies taking effect.
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United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
3M Company (MMM) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
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