Tariffs are back. Two mid-caps reveal the early impact
What's inside this week's Sentiment Wrap?
- This week, we're spotlighting two mid-cap stocks that just dropped their earnings.
- Plus, we'll see how their earnings sentiment shifted.
Let's find out…
Just when the sirens from the Middle East eased a bit, the talk of tariffs is back in town. In case you were not tracking the news, President Trump wrote to over twenty countries, warning that tariffs ranging from 25% to 50%, and even up to 200% in some sectors, will be imposed if new trade deals are not finalized by August 1. The headline: A 35% tariff on Canadian imports and steep duties on goods from big trading partners like Japan, South Korea, and Brazil.
Goldman Sachs estimates that the U.S. average effective tariff rate rose from 13% to 17% in early 2025. Companies are expected to pass around 70% of this cost to consumers; any shortfall, however, will surely squeeze margins. Morningstar's analysis of Q2 earnings previews suggests slowing earnings growth across sectors, with tariffs beginning to erode corporate profitability more visibly.
Estimates and projections aside, the proof of the pudding is in the eating. Q2 earnings season is just heating up, and Wall Street is eager to hear what companies say about tariffs in their guidance. 2 Stocks with significant tariff impact just came out with their results. Let's look at how their sentiment shifted as reflected by AlphaPro.ai's sentiment score
1. Conagra Brands (CAG)
Conagra Brands expects a 3% rise in its cost of goods sold due to tariffs. This translates to more than $200 million in additional costs this fiscal year. To mitigate the tariff effects on its bottom line, at least partially, the company plans to take targeted price increases on its canned goods business. On the positive side, Conagra Brands is expecting a very strong productivity of over 5% for fiscal 2026, repatriating outsourced production at lower costs, targeted pricing, and a new AI-driven efficiency initiative.
Keep an eye on the price move as CAG's earnings sentiment score just got a boost of 12 points. Especially with the stock facing a downtrend for quite some time, does the sentiment shift indicate a trend change? Our backtesting data of over six quarters shows that AlphaPro's Earnings Sentiment Score serves as a great leading indicator for stock price movement. The correlation is more pronounced in the mid and small-cap segments.
2. Levi Strauss (LEVI)
Levi's earnings sentiment score remained flat this quarter at 92, down slightly from 94 in the quarter before.
The company expects a potential tariff impact of $25 million to $30 million on profitability through the end of the year. On the mitigation front, Levi Strauss is reducing its reliance on China, negotiating with vendors, and implementing targeted pricing changes.
As for earnings guidance, LEVI has increased its EPS guidance for fiscal year 2025 to $1.25-$1.30 per share, up from the previous range of $1.20-$1.25 per share. With a consistently high sentiment score and an upbeat earnings expectation, the stock can be a good hold for investors looking for resilient mid-cap names navigating the tariff storm. What are we missing?
Before We Sign Off
The high-octane tariff talks can be quite unsettling when all you want is to put your hard-earned money in the market, with a margin of safety. With constant noise from all quarters, it can be difficult to spot the signals.
AlphaPro's Earnings Sentiment Score gives you a single actionable data point to cut through market noise. Check out AlphaPro.ai to explore real-time sentiment scores, earnings call insights, and curated stock research.
Same time next week? See you then.
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