Immediately after the Trump administration’s announcement of tariffs on imported steel and aluminum, battle lines started to be drawn. Much of the attention focuses on how the trade war impacts the United States’ relationship with China, Mexico, and even Canada. However, as an investor, you should think somewhere much closer to home.
Inside the United States, companies began to sound the alarm about the effect the tariffs would have on their businesses. Tariffs impose a tax on imports from foreign countries. And because the economy doesn’t happen in a vacuum, once the Trump administration announced their intention to impose tariffs on imported goods and raw material entering the United States, other countries were inevitably going to levy tariffs in return or find other ways to slow their imports of American goods.
Plus, tariffs meant to benefit one sector or industry typically invoke the law of unintended consequences. This simply means that there are certain U.S. companies that will be hurt by the same tariffs that will benefit other sectors.
In the following slides, we’ll review 10 stocks that are set to suffer from the Trump tariffs. In some cases, it is because of counter-tariffs being imposed on them, and in others, it is because of the direct effect of the tariffs that have been imposed.
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- Caterpillar
- Boeing
- Toyota Motor Corporation
- Tyson Foods
- Harley-Davidson
- Brown-Foreman
- Anheuser-Busch InBev
- MillerCoors
- General Motors
- Sharp, Inc
#1 - Caterpillar (NYSE:CAT)
Caterpillar (NYSE: CAT)– The simple explanation for Caterpillar being on this list is China. The company reported that 44 percent of its first-quarter sales growth came from the Asia-Pacific region, led by China. That helped the company report a strong 24 percent growth in retail sales of machinery for the months of March, April, and May. And their strong first quarter results included record earnings per share (EPS) of $10.75 for the fiscal year 2018. However, perhaps in response to the Trump administration announcing the first round of tariffs in March, Caterpillar already warned that this may be as good as it gets. In fact, the 24 percent growth was the lowest of their five previous rolling three month periods. The company is heavily dependent on the construction cycle and many analysts are seeing that cycle ripe for a correction.
Investors looking for positive news can point to strong second-quarter earnings which saw management raise their full-year adjusted profit per share by 7 percent and a stock that has a forward P/E ratio just under 12. It should be noted that Caterpillar is not just dependent on construction; their business is closely tied to the energy and mining industries, which are influenced by commodity prices, particularly the price of oil. If these industries continue to show strength, then Caterpillar should continue to show strength. Still, at the current time, analysts are viewing Caterpillar with caution.
About Caterpillar
Caterpillar Inc manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives in worldwide. Its Construction Industries segment offers asphalt pavers, compactors, road reclaimers, forestry machines, cold planers, material handlers, track-type tractors, excavators, telehandlers, motor graders, and pipelayers; compact track, wheel, track-type, backhoe, and skid steer loaders; and related parts and tools.
Read More - Current Price
- $366.04
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 6 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $384.33 (5.0% Upside)
#2 - Boeing (NYSE:BA)
Boeing (NYSE: BA)– Boeing is another company that faces a threat from the tariffs being imposed on China. While the stock is up approximately 12 percent for the year, it has dipped 10 percent in the last month, resting at 12 percent below its 52-week high. Does this mean that an attractive stock that may have been overbought is now a better value? Or does this dip foreshadow the beginning of a more protracted selloff? These are the questions that seem to be dividing analysts and investors. Analysts point to Boeing’s strong fundamentals and shrug off the ramifications of the tariffs. But investors are wary. In response to a question about the tariffs in early August, Dennis Muilenberg, Chairman, President, and CEO of Boeing said in an interview “Global trade is extremely important to Boeing and its customers.” That may be an understatement considering that Boeing is the largest single exporter to China. This was on the heels of their announcement of second-quarter earnings and revenue that beat analysts’ expectations. However, their profit projection for 2018 fell below analysts’ estimates.
About Boeing
The Boeing Company, together with its subsidiaries, designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide. The company operates through Commercial Airplanes; Defense, Space & Security; and Global Services segments.
Read More - Current Price
- $177.35
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 10 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $190.11 (7.2% Upside)
#3 - Toyota Motor Corporation (NYSE:TM)
Toyota Motor Corporation (NYSE: TM)– Perhaps no company better defines the uncertainties caused by the Trump tariffs than Toyota. How else do you explain a company that reports a record fiscal first quarter (Toyota's fiscal year begins in April) yet a stock price that remains flat? In the words of the senior managing officer, Masayoshi Shirayanagi, it's the uncertainty being caused by the tariffs and subsequent trade war that could have an "enormously big" impact on U.S. sales. Toyota reported adjusted earnings per share of $3.98 on revenue of $66 billion. They also posted year-over-year revenue that was up 4.5 percent. And to top it off, they reported a record net profit of $5.9 billion as well. Still, the company announced in June that the cost of every vehicle sold in the United States, including popular models like the Toyota Camry, would increase to offset the proposed 25 percent tariff. Moody’s has said the tariff would be “broadly credit negative” for the entire industry.
About Toyota Motor
Toyota Motor Corporation designs, manufactures, assembles, and sells passenger vehicles, minivans and commercial vehicles, and related parts and accessories in Japan, North America, Europe, Asia, Central and South America, Oceania, Africa, and the Middle East. It operates in Automotive, Financial Services, and All Other segments.
Read More - Current Price
- $178.17
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Tyson Foods (NYSE:TSN)
Tyson Foods (NYSE: TSN)– Tyson was one of the first companies to be hit by retaliatory tariffs from China. Back in April, the company was directly impacted by China’s 25 percent tariff on pork. According to industry data, China was the second largest importer of pork by volume in 2017 and there are few other countries that are poised to pick up the extra capacity. The anticipated backup in U.S. meat supplies sent Tyson’s share prices tumbling over six percent. Then in July, shares dropped 7.6 percent to a 12-month low of $58.72 on the news that the company had cut its earnings outlook due to the tariffs. According to CEO Tom Hayes, “changing global trade policies here and abroad” and “the uncertainty of any resolution” were the key factors contributing to both lower prices and oversupply of their products in the United States. The company did report strong earnings for the last quarter. However, some of that may have been due to selling off their pizza crust business to the private equity firm Peak Rock Capital. The company also announced that they are taking steps to divest themselves of additional bakery operations to focus on expanding their leadership position in the protein segment of their business.
About Tyson Foods
Tyson Foods, Inc, together with its subsidiaries, operates as a food company worldwide. It operates through four segments: Beef, Pork, Chicken, and Prepared Foods. The company processes live fed cattle and hogs; fabricates dressed beef and pork carcasses into primal and sub-primal meat cuts, as well as case ready beef and pork, and fully cooked meats; raises and processes chickens into fresh, frozen, and value-added chicken products, including breaded chicken strips, nuggets, patties, and other ready-to-fix or fully cooked chicken parts; and supplies poultry breeding stock.
Read More - Current Price
- $58.02
- Consensus Rating
- Reduce
- Ratings Breakdown
- 1 Buy Ratings, 6 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $60.67 (4.6% Upside)
#5 - Harley-Davidson (NYSE:HOG)
Harley-Davidson (NYSE: HOG)– You can’t blame Harley-Davidson if they feel that the tariffs imposed on steel and aluminum are more than they can stomach right now. The iconic motorcycle manufacturer was already facing a shrinking target audience. Fewer people are riding motorcycles. And rising commodities prices are increasing their manufacturing costs, resulting in those costs being passed along to Harley-Davidson consumers. Chief Financial Officer John Olin said the company is projecting the tariffs to cost the company $45-$55 million in 2018. About two-thirds of that number would come from the European Union's retaliatory tariffs. This is creating strong headwinds for the stock even as the company posted second-quarter results that were better than expected. Revenue fell less than expected. The 3.3 percent drop lowered their revenue to 1.53 billion above the $1.42 billion forecast by analysts. And motorcycle shipments also came in at 72,593, down 11 percent but again beating estimates.
About Harley-Davidson
Harley-Davidson, Inc manufactures and sells motorcycles in the United States and internationally. The company operates in three segments: Harley-Davidson Motor Company, LiveWire, and Harley-Davidson Financial Services. The Harley-Davidson Motor Company segment designs, manufactures, and sells motorcycles, including cruiser, trike, touring, standard, sportbike, adventure, and dual sport, as well as motorcycle parts, accessories, and apparel, as well as licenses its trademarks and related services.
Read More - Current Price
- $30.75
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $42.57 (38.4% Upside)
#6 - Brown-Foreman (NYSE:BF)
Brown-Foreman (NYSE: BF)– The question for investors who are looking at the effect of the tariffs on the distiller of Jack Daniels whiskey is this: will raising prices by 10 percent (brought on by the European Union’s imposition of a 25 percent tariff) change consumption habits? Psychology would seem to argue against it. Consumers will attend to their vices even when faced with higher prices. And, the 10 percent increase may not be perceived as that much of a hike. Still, the EU carefully selected the products on which they would impose a tariff. The Jack Daniels brand is the best-selling whiskey by Brown-Foreman and the second highest selling whiskey in the world. Add to that the fact that 27 percent of sales come from Europe and you can see that this has the potential to put this stock on the rocks. However, Brown-Foreman also produces Woodford Reserve, a super-premium brand of bourbon that is also subject to the tariff. It has shown strong growth (22 percent in underlying net sales for 2018) that may help to trim any deterioration with the Jack Daniels brand.
About
- Current Price
- 0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - Anheuser-Busch InBev (NYSE:BUD)
Anheuser-Busch InBev (NYSE: BUD)– On the one hand, Anheuser-Busch Chief Financial Officer Felipe Dutra says that the company has not yet had to deal with the rising costs of steel and aluminum from the tariffs imposed by the Trump administration. And there is hope that the U.S. will reach an agreement with Canada that will permanently exempt that country, and other allies, from the aluminum tariff as well as price spikes that have already impacted their business. Said CEO Carlos Brito, "We are very hopeful … that the list of allies continues to get populated because then you could maybe get to the situation where 80 percent of the aluminum supply … could be exempted (from the tariff)." According to industry analysts, if the tariffs remain in place, the beverage industry as a whole could face a hit of $350 million and could face the loss of 20,000 jobs. What is less clear is what the brewer can do about slumping sales of its core Budweiser and Bud Light brands which have been losing market share to the burgeoning craft beer industry.
About Anheuser-Busch InBev SA/NV
Anheuser-Busch InBev SA/NV produces, distributes, exports, markets, and sells beer and beverages. It offers a portfolio of approximately 500 beer brands, which primarily include Budweiser, Corona, and Stella Artois; Beck's, Hoegaarden, Leffe, and Michelob Ultra; and Aguila, Antarctica, Bud Light, Brahma, Cass, Castle, Castle Lite, Cristal, Harbin, Jupiler, Modelo Especial, Quilmes, Victoria, Sedrin, and Skol brands.
Read More - Current Price
- $50.21
- Consensus Rating
- Buy
- Ratings Breakdown
- 6 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $79.00 (57.3% Upside)
#8 - MillerCoors (NYSE:TAP)
MillerCoors (NYSE: TAP)– The U.S. arm of Molson Coors Brewing Company and the maker of Miller Lite and Coors Lite is lamenting the aluminum tariffs as they are considering price increases to offset the $40 million in profits they are forecast to lose in 2018. As the industry as a whole struggles with the rise in manufacturing costs, they are now looking to pass the cost on to consumers at a time when macro beer is already losing market share to craft beer and wine. The price increase might be as much as $0.50 per 12-pack which, according to CEO Gavin Hattersley, would "cause the beverage market to be hammered" in addition to potentially causing job losses in excess of 20,000. In their second-quarter earnings statement, the company cited an increase in both their top and bottom line performance despite a 2.4% decrease in worldwide brand volume.
About Molson Coors Beverage
Molson Coors Beverage Company manufactures, markets, and sells beer and other malt beverage products under various brands in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company offers flavored malt beverages including hard seltzers, craft, spirits and energy, and ready to drink beverages.
Read More - Current Price
- $59.34
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $62.00 (4.5% Upside)
#9 - General Motors (NYSE:GM)
General Motors (NYSE: GM)– With the Trump administration tariffs going into effect on June 1
st, you have to view General Motors second-quarter results with a grain of salt. While their net income rose a solid 44% from the same period in 2017, the company dramatically lowered its profit outlook for 2018. They reduced their forecasted earnings per share down to $6 from a previously announced range of $6.30-$6.60. The company stated that this reduction was largely because of the increase in raw materials prices due to the tariffs. In the second quarter alone their material costs were nearly $300 million higher than in 2017. For the entire year, the company is forecasting that the combination of higher commodity prices and an unfavorable exchange rate with South America will result in a cost of about $1 billion higher than what they forecast at the beginning of the year. This is not just a problem facing General Motors but the auto industry as a whole.
About General Motors
General Motors Company designs, builds, and sells trucks, crossovers, cars, and automobile parts; and provide software-enabled services and subscriptions worldwide. The company operates through GM North America, GM International, Cruise, and GM Financial segments. It markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Baojun, and Wuling brand names.
Read More - Current Price
- $51.81
- Consensus Rating
- Hold
- Ratings Breakdown
- 10 Buy Ratings, 9 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $58.70 (13.3% Upside)
#10 - Sharp, Inc (OTC:SHCAF)
Sharp, Inc.– Although not facing the cost pressures of other on this list, Sharp is a case where companies, and investors, are making decisions based on the unknown. That is, could the tariffs being volleyed back-and-forth escalate into something larger? That seems to be the impetus behind Sharp announcing that they were canceling a plan to issue approximately $1.8 billion of new shares. In a statement, the company announced that the degree of instability in the market due to the trade conflict between the United States and China would not allow the share sale to maximize the benefit to its stakeholders. Shares of Sharp rallied on the news, and the company said that it did not forecast the canceled sale to have a financial impact in the medium term. However, the company still has to deal with how they will raise capital. The share sale was being used as part of the company restructuring following its purchase of a majority stake in Taiwan’s Foxconn in 2016
About
- Current Price
- 0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
Tariffs create winners and losers. For every sector and business that benefits, there are those that suffer. All the announcements coming out of Washington and foreign governments breeds uncertainty and if there's one thing investors hate it is uncertainty. The market is brutally indifferent to the why behind things. It’s a numbers game and for many of these companies, the numbers (for the moment) are stacked against them.
However, change is a constant. And while the final chapter on the tariffs has yet to be written, necessity is the mother of invention. Or in this case, perhaps, innovation. As an investor, you should pay attention to how the tariffs may fundamentally alter the business models of some iconic companies. How they respond may be the next big story.
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