By Caroline Valetkevitch
NEW YORK (Reuters) - Investors worried the U.S. could be on the brink of a recession may be relieved by some early comments from company executives this earnings season suggesting demand remains strong and any potential downturn will likely be mild.
American Express Co (NYSE:AXP)'s chief financial officer was among the latest to offer a relatively buoyant outlook for the U.S. economy, telling Reuters on Thursday that customers are showing resilience and that he has yet to see any signs of a recession.
The credit card company reported quarterly earnings that missed analysts' expectations, however, as it kept aside a large sum to cover potential defaults.
Similarly upbeat comments on the state of the economy one week into U.S. companies' first-quarter earnings have come from executives of Bank of America (NYSE:BAC), Baker Hughes and both Delta Air Lines (NYSE:DAL) and United Airlines (NASDAQ:UAL), with corporate chiefs expressing optimism the U.S. will avoid a prolonged recession.
"Companies and consumers are being more careful, but there's no suggestion that it's falling off of a cliff," said Quincy Krosby, chief global strategist at LPL Financial.
Those outlooks contrast with Wall Street's gloomy forecast for corporate results, which sees a 4.7% decline in the S&P 500 companies' first quarter earnings versus the year-ago period, according to IBES data from Refinitiv. That would mark the second straight quarterly fall for corporate earnings, a so-called "earnings recession" that last occurred when COVID-19 hit corporate results in 2020.
So far, 76% of the 88 companies that have reported have beaten analysts' earnings expectations, compared with the 74% average for the past four reporting periods, based on Refinitiv data. Moreover, in aggregate, companies are reporting earnings 7.8% above expectations, compared with a 4.2% average for the prior four quarters.
American Express was among the notable misses, while Tesla (NASDAQ:TSLA) on Wednesday posted its lowest quarterly gross margin in two years.
Many economists still are predicting a U.S. recession at some point in 2023 or 2024, and some companies already have cut jobs in anticipation of a slowdown. Aggressive interest rate hikes from the Federal Reserve since last year to try to tame inflation have fueled the worries over a recession, while last month's collapse of two U.S. regional banks added fresh concerns.
Still, some corporate leaders have recently suggested the U.S. economy may avoid a deep downturn.
Baker Hughes Co. said in a presentation this week that the energy outlook remained constructive even with elevated recession risks.
Both Delta and United gave upbeat near-term outlooks on travel demand, with Delta a week ago saying it expects summer travel demand will result in higher-than-expected profit for the quarter through June despite other risks.
The chief executive of United, which reported results this week, said in a statement Tuesday that bookings for international travel are growing at twice the domestic rate.
Meanwhile, Bank of America Chief Executive Officer Brian Moynihan told analysts following the firm's quarterly results this week that "everything points to a relatively mild recession, given the amount of stimulus that was paid to people and the money they have left over."