In recent earnings calls, leaders disagreed about the state of the economy.
KEY TAKEAWAYS
- Much like economists, corporate executives are divided over whether the economy is headed for a recession.
- In recent earnings calls, some leaders said they expected a recession, while others said the economy was still resilient.
- Several leaders emphasized the uncertain economic outlook on recent earnings calls.
CEOs are just as divided as economists on whether the economy will go into a recession or not, based on recent earnings calls.
What Corporate Leaders Have Said
These high-stakes predictions on whether the economy will be dragged into a recession by the Federal Reserve’s campaign of anti-inflation interest rate hikes or continue to defy economic gravity by staying resilient as consumers continue to open their wallets can influence whether companies lay off their workers and cancel projects in anticipation of an economic downturn.
As of the third quarter, 80% of CEOs anticipated the U.S. to enter a “brief, shallow” recession within the next 18 months, according to a survey by The Conference Board released earlier this month. Despite bracing for a recession, the percentage of leaders planning to expand their workforces was double that of leaders planning layoffs at 40% compared to 20%.1
Here are how some CEOs view the economy according to remarks from recent earnings calls.
Juan Luciano, CEO of Agribusiness Giant Archer-Daniels-Midland
“We are seeing lower recession challenges and the U.S. consumer very resilient, and that’s bringing resiliency in our core products for food demand.”2
Last month, Archer-Daniels-Midland (ADM) reported profit that beat estimates and raised its outlook for the year as the agricultural giant said it benefited from a record harvest in Brazil and strong demand for its products. Shares of Archer-Daniels-Midland shares rose over 4% after reporting its results on July 25 and have gained about 2% since then, but they’re still down more than 7% year-to-date.3
Don Edward McGuire, CFO of Payroll Provider ADP
“Our fiscal ’24 outlook assumes some moderation in economic activity over the course of the year, but nothing dramatic.”4
ADP‘s revenue for the quarter and forecast for fiscal 2024 came out ahead of projections when it released its latest results on July 26, after it won a number of key new contracts with business clients that use its services. ADP shares rose 6.6% that day and are up 5.5% so far this year.5
John Doyle, CEO of Insurer Marsh & McLennan Companies
“The economy has been quite resilient, but inflation remains persistent. You’re obviously beginning to see it come down here in the United States, but not at the level that the central bank seems to be targeting, with their mission to reduce inflation,” said Doyle. “That’s going to have an impact on not just the market here, but in other markets. And so, I think there is still a meaningful risk of recession.”6
Marsh & McLennan Company (MMC) had reported higher-than-expected profit on July 20, with a boost from higher interest income on client funds. Its shares are up 14% year-to-date.7
Conor Flynn, CEO of Kimco Realty Corp., Owner and Operator of Shopping Centers
“Small shop demand is quite robust and that’s very, very encouraging I think for the overall U.S. economy. Because if you think about the small business being really the heartbeat of the U.S. economy, we’re seeing tremendous demand on small shops, driving our occupancy up near all-time highs.”8
Kimco Realty Corp. (KIM) topped expectations for sales and revenue when it reported last month, despite a rise in expenses as rents rose, with terms for new tenants increasing 25.3%.9 Shares of Kimco Realty are down 10.8% for 2023 so far.
- The Conference Board. “CEO Confidence Improves in Q3.”
- Archer-Daniels-Midland. “Q2 2023 Archer-Daniels-Midland Co Earnings Presentation.”
- Archer-Daniels-Midland. “ADM Reports Second Quarter Earnings per Share of $1.70, $1.89 on an Adjusted Basis.”
- ADP. “ADP.OQ – Q4 2023 Automatic Data Processing Inc Earnings Call.”
- ADP. “ADP Reports Fourth Quarter and Fiscal 2023 Results; Provides Fiscal 2024 Outlook.”
- Marsh McLennan. “Q2 2023 Marsh McLennan Earnings Conference Call.”
- Marsh McLennan. “MARSH McLENNAN REPORTS SECOND QUARTER 2023 RESULTS.”
- Kimco Realty Corp. “Q2 2023 Earnings Call.”
- Kimco Realty. “Kimco Realty Announces Second Quarter 2023 Results.”
- https://www.investopedia.com/corporate-leaders-divided-on-economic-outlook-q2-earnings-7692634
