Director of Research Jim Kelleher, CFA, has surveyed the Argus analyst team about the impact of tariffs on companies in the Argus Universe of Coverage. The tariff environment is dynamic, to say the least. The White House has levied tariffs or threatened to levy tariffs, but often paused, postponed, or withdrawn pledged tariffs. Most recently, China and the U.S. agreed to reduce baseline tariffs to 10% for 90 days (30% in the U.S. reflecting a 20% fentanyl penalty). More than the tariffs themselves, the lack of a finished tariff infrastructure complicates business planning, staffing decisions, and capital investment. Within this dynamic environment, companies are focused on taking actions in areas they can control and planning proactively for a range of tariff scenarios. Companies are anticipating both direct and indirect tariff impacts. Direct impacts would include higher costs for imported finished goods and components, foregone sales as a result of reciprocal tariffs in other nations, and other factors. For example, a manufacturing company would face direct impacts as it pays higher prices for imported parts. Indirect impacts would include a slowing in business related to a broad softening in the economy. All companies likely will feel indirect impacts. A utility, for example, could begin to see a slowing in industrial and commercial kilowatt-hour sales, particularly in niches such as warehousing, trucking and rail, and other freight-related functions. We asked Argus analysts to survey their companies for their commentary on direct and indirect tariff impacts, as well as actions these companies are taking to mitigate the challenging trade environment. Nearly every company in Argus analyst coverage has issued commentary regarding tariffs, much as (five years ago) nearly every company in coverage had something to say about the then-developing COVID-19 pandemic. Below we offer a sampling of company responses to the unfolding tariff environment across a range of sectors and industries. We intend to update our survey on a regular basis at least until the tariff environment, in whatever shape or form, becomes a stable part of the U.S. economy.

Chipotle Mexican Grill is the largest fast-casual chain restaurant in the United States, with systemwide sales of $11.3 billion in 2024. The Mexican concept is almost exclusively company-owned, with just three license stores operated through a master franchise relationship with Alshaya Group in the Middle East. It had a footprint of 3,726 stores at the end of 2024, heavily indexed to the United States, although it maintains a small presence in Canada, the UK, France, and Germany. Chipotle sells burritos, burrito bowls, tacos, quesadillas, and beverages, with a selling proposition built around competitive prices, high-quality food sourcing, speed of service, and convenience. The company generates its revenue entirely from restaurant sales and delivery fees.

Chipotle Mexican Grill opened its first restaurant in 1993, became a subsidiary of McDonald's in 1998, and was spun off in a public offering in 2006. The company operates more than 3,400 restaurants. The restaurants offer quick service but maintain traditional cooking methods and utilize high-quality ingredients. The company has a tightly focused menu, but store design and decor vary by location. The company has been expanding rapidly in recent years as interest in Southwestern food has spread throughout the U.S. With a market capitalization of $66.1 billion, the shares are generally regarded as large-cap growth.

Recession Clues How close is the U.S. economy to a recession? This week is jam-packed with clues, as economic data pours in and earnings reports continue at peak volume. Last week, the Dow Jones Industrial Average gained 2.5%, the S&P 500 was up 4.6%, and the Nasdaq rose 6.7%. All three indices are still negative for the year to date, with the Dow and the S&P 500 down 6%, and the Nasdaq off 10%. The earnings calendar includes Domino's Pizza and MGM Resorts on Monday; Starbucks, Coca-Cola, Bookings Holdings, UPS, and Visa on Tuesday; Microsoft, Meta Platforms, Caterpillar, and GE HealthCare on Wednesday; Apple, Amazon, McDonald's, CVS, Airbnb, and Eli Lilly on Thursday; and Chevron and Exxon and Friday. So far, 36% of S&P 500 companies have reported and earnings for the quarter are up 10% from the prior-year quarter. That is above the consensus call for EPS growth of about 3%-8% and follows 17% growth in 4Q24 and 9% growth in 3Q24 (according to LSEG). Healthcare currently is the leading sector, up 39%, and Energy is at the bottom, down 18%. For 2025, our full-year earnings estimate is for low-double-digit growth from 2024. On the economic calendar, the Personal Consumption Expenditures Index (on inflation) and the latest update on GDP are both due on Wednesday. Other releases of note are Nonfarm Payrolls on Friday, Personal Income on Wednesday, and ISM Manufacturing on Thursday. The Economic Call of the Week from Argus' Chief Economist Chief Graja, CFA, is that we likely will not be forecasting for a recession after all the data comes in. For Nonfarm Payrolls, our estimate is for an increase of 130,000 and the consensus is about the same. A month-over-month decline would be a recession warning. We do not expect a year-over-year decline in the total number of workers on establishment payrolls, but that would also be a warning. Some might be concerned if the year-over-year increase is less than 1%. Turning to Personal Income, the year-over-year change excluding transfer receipts could be a very important number. We believe this is one of the indicators that the National Bureau of Economic Research Recession Committee watches very closely. Growth has been declining. It was 1.13% in February down from 3.28% last March. We would be happy if growth stays above 1.1% or even 1%. A decline would be a concern. And finally, our forecast for ISM Manufacturing is for an index value of 48.6. The consensus is 47.9. A decline to 42.3 would be a concern, but a reading below this level would likely need to be in place for several months to provide a recession warning in the absence of other clear signals. Turning to other important data, the Atlanta Fed GDPNow measure now forecasts a decline of 2.5% for 1Q, signaling contraction. We recently lowered our forecast for GDP and now expect expansion of 1.4% in 1Q and 1.3% for all of 2025. The Cleveland Fed Inflation Nowcast is now at 2.4% for CPI in April, in-line with the March rate. Mortgage rates ticked down two basis points (bps) last week, with the average 30-year fixed-rate mortgage now at 6.81%, according to FreddieMac. Gas prices fell three cents to an average of $3.14 per gallon for regular gas. The next Fed rate decision is on May 7, with odds at 10% for a rate cut, according to the CME FedWatch rate tool. The next meeting after that is on June 18, when odds jump to 63% for a cut. We continue to forecast two 25 bps rate cuts in 2025, both in the back half of the year.