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How some US companies are turning a potential tariff hangover into an even bigger profit party

By preparing for the worst, these management teams no longer have to hope for the best.

7/23/25 11:41AM

By preparing for the worst, some of America’s leading companies no longer have to hope for the best.

Sam Rines, macro strategist at WisdomTree and the brains behind its GeoAlpha Opportunities Fund, has a brilliant thesis that helps explain one of the thornier questions in markets: how have stocks done so well, and earnings estimates held up so much, despite a big rise in tariff rates (albeit in many cases not as bad as what was floated on April 2)?

One could be pithy and just say “AI,” but that would be incomplete.

Rines is one of my favorite strategists for the way he scours micro information from companies to inform macro, top-down views about the economy and financial markets, and his work in unpacking how management teams are adapting to tariffs of an unknown size and scope is a great example of just this.

Here’s an excerpt from his recent note:

“Then there are the companies with ‘too much tariff’ priced in. And those are the ones to watch. Again, there is a particular cadence to the companies —

- Guided for the worst of all possible worlds. (the reverse Leibniz guide)

- Found out it was not quite that bad after various tariff announcements and internal adjustments.

- Are now guiding some of the impact back to the bottom line. (emerged from the Dark Night of Earnings)”

One thing that blue-chip companies are very good at is overcoming shocks. I mean, look at the chart:

(It helps that the ones that aren’t get expunged from the index and replaced by firms that are!)

When you tell management teams that they’re about to have a 500-pound cross to bear, they’ll prepare. And when that turns out to be 350 pounds, they’ll be able to run a sub-three-hour marathon carrying it.

Rines highlights a few examples of this phenomenon during this earnings season. The best one, without a doubt, is 3M.

“Guiding down the tariff impact from $0.20 to $0.40 of net impact to $0.10 might sound trivial,” he wrote. “But the interaction of expecting a larger impact and preparing for it led 3M to guide earnings higher than their pre-tariff (January) expectation.”

Now, does this hold as a general rule? That’s a little tough to disentangle (and the answer is probably not). S&P 500 2025 earnings-per-share estimates are well below where they started the year. There is a tendency for calendar-year earnings to be revised lower within the year, though. So I’m not prepared to say (nor is Rines!) that tariffs are outright positive for earnings. But based on his work, I am fairly confident in concluding that tariffs provided a kick in the rear end that catalyzed some executive teams to make decisions that are boosting the profitability of their businesses.

Rines highlights Procter & Gamble, Deere & Co., and Kimberly-Clark as some of the stocks to watch to observe how widespread this dynamic may be.

“There are plenty of companies with a tariff overhang. For some, that hangover will be warranted. But others will emerge on the other side with better outcomes,” he concluded. “It may be surprising to see who the winners are at the end of earnings season. With tariff impacts being mitigated and pricing plans to come, this earnings season could be surprisingly positive.”

(Somehow, we got through this piece without referencing the apocryphal and not quite correct quote from JFK about how the Chinese word for crisis is composed of “danger” and “opportunity.”)

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Luke Kawa20h

US job growth crushes estimates in March, with the unemployment rate unexpectedly dipping to 4.3%

US hiring surged in March, with job growth of 178,000 well ahead of estimates while the unemployment rate unexpectedly edged down to 4.3%.

Economists had anticipated non-farm payrolls growth of 65,000 for the month with the unemployment rate holding steady at 4.4%

Event contracts had presumed that job growth would come in between 70,000 and 80,000, a sunnier view than Wall Street.

Prediction markets had anticipated roughly 70% odds that the unemployment rate would hold steady at 4.4%, with a much higher implied likelihood of an increase versus a decrease.

(Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.)

S&P 500 equity futures, which were modestly negative ahead of the report in thin holiday trading, were little changed in the immediate aftermath of this release. Treasury yields jumped, with the 10-year yield rising to 4.35% from 4.31%.

The inflationary impact of the higher crude prices in the wake of US-Israeli attacks on Iran and the subsequent challenges shipping oil through the Strait of Hormuz has been the dominant macroeconomic development of the past month, rather than US labor market data.

Before the conflict began, roughly 60 basis points of easing by the Federal Reserve was priced in for 2026. Heading into this release, that’s slimmed to just 5 basis points as US gas prices jumped above $4 per gallon.

The Federal Reserve’s “dot plot” from the March meeting still suggests that officials think it will be appropriate to lower the policy rate this year if the economy unfolds in line with their expectations.

The February jobs report had been a big disappointment, with jobs unexpectedly contracting and the unemployment rate edging higher. With this release, the February figures were revised to show an even larger decline of 133,000.

Strikes which had weighed on employment in health care during February, a critical source of US employment growth in recent years, seemingly reversed. The industry accounted for more than half of net job growth for March.

Tasha Matsumoto

4/2/26

Stocks eke out gains on hopes for a path forward for reopening the Strait of Hormuz

Stocks rebounded on news that Iran is drafting a protocol with Oman to “monitor transit” through the crucial Strait of Hormuz.

Matt Phillips4/2/26

AI server cluster maker Penguin Solutions takes flight

Small-cap AI server cluster maker Penguin Solutions surged Thursday after posting better-than-expected Q2 revenue and profit numbers Wednesday after the close, along with an increase in full-year sales and profit guidance.

The company, which was known as Smart Global Holdings until July 2024, has positioned itself as a provider of “end-to-end AI infrastructure solutions.”

Its Advanced Computing division designs and sells computers, cabling, and cooling systems, the server racks and clusters of racks AI data centers need. Its other main division sells flash and DRAM memory products.

It’s a pretty small company, with a fully diluted market cap of just over $1 billion and roughly 2,900 employees, according to FactSet.

The stock is volatile. Penguin dove during last year’s tariff tantrum that followed “Liberation Day” in April. Then it turned tail and doubled through early October amid a surge of call options activity, which tends to reflect retail interest. From the October peak, it then plunged by about 50%, before Thursday’s renaissance.

For what it’s worth, call options activity in Penguin is pretty busy today, too — relatively speaking — with roughly 2,625 traded as of 1:15 p.m. ET. That’s the most since early January, when the company last reported quarterly numbers. The average volume over the previous 25 trading sessions is about 325 calls a day, FactSet data shows.

Penguin Solutions Stock Takes Off On AI Bolstered Outlook

The company, which was known as Smart Global Holdings until July 2024, has positioned itself as a provider of “end-to-end AI infrastructure solutions.”

It’s a pretty small company, with a fully diluted market cap of just over $1 billion and roughly 2,900 employees, according to FactSet.

Luke Kawa4/2/26

Momentum returns to optics stocks as the release valve for AI optimism

Potentially imminent end to the war? Buy optics stocks.

Maybe not? Buy optics stocks anyway.

Effectively all the juice left in the AI trade is coming from optics (and memory) stocks. And the latter group is taking a bit of a breather today while the former continues to surge.

Shares of Ciena Corp., Lumentum, and Coherent are building on recent big gains and among the biggest gainers in the S&P 500 near midday, while Applied Optoelectronics is also surging on Thursday.

These companies all provide solutions that help information move around in data centers, and thus are key beneficiaries of the aggressive capex plans of hyperscalers. Nvidia has invested $2 billion apiece in Coherent and Lumentum in deals that also include purchase commitments.

Matt Phillips4/2/26

Space stocks rip during a topsy-turvy day for the equity market

Satellite-services-from-space stocks surged Thursday after reports that Amazon is in talks to buy Globalstar, which provides voice and connectivity services from its satellite network. It also can’t hurt that the general mood around space is ebullient, following the successful launch of Artemis II on Thursday.

Planet Labs and ViaSat also soared on the news.

The gains for EchoStar — seen as a backdoor play at pre-IPO SpaceX exposure — and Rocket Lab were more muted, perhaps because a deep-pocketed competitor like Jeff Bezos getting serious about space services could complicate the plans of the two largest commercial space launch companies.

Rocket Lab and SpaceX see launch services as key to their aspirations of being major providers of voice and data services from low-Earth orbit satellites.

Tesla CEO Elon Musk’s SpaceX is the dominant provider of such services, and the early rumors on the company’s planned IPO — expected to be the largest ever — suggest the market is very excited about the prospects for the industry.

Elsewhere in the space stock world, Intuitive Machines — a maker of space infrastructure that provides services to NASA for lunar missions — also rose.

Globalstar surges after FT reports that Amazon is in talks to buy the satellite group

Rocket Lab and SpaceX see launch services as key to their aspirations of being major providers of voice and data services from low-Earth orbit satellites.

Elsewhere in the space stock world, Intuitive Machines — a maker of space infrastructure that provides services to NASA for lunar missions — also rose.

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