China slowdown hits corporate earnings across the board

China: call it the good, bad and ugly for earnings. The world's second-largest economy has become a big topic for investors as a deluge of U.S. companies report second-quarter results that have taken a hit from China's slowdown.

From software companies to drugmakers to fast food chains, economic weakness in China is denting multinational companies—and painting a much different story from the Chinese government narrative of 7 percent, second-quarter gross domestic product growth.

"China is no longer a locomotive of global growth," Mohamed El-Erian, Allianz's chief economic adviser, told CNBC on Thursday.

The comment is proving true for a number of blue chip industrial companies, starting with mining and earth-moving equipment maker Caterpillar.

"Our industry has been cut in half in the last year as they [China] stabilize that economy. It was too hot in 2012 and too slow right now," said Doug Oberhelman, chief executive of Caterpillar. "Somewhere between is where we will be, but until that happens, we're caught in this period where we really have to hunker down and make sure we do everything we can internally day to day."

The Peoria, Illinois, company Thursday cut its full-year sales outlook to $49 billion, $1 billion lower than a previous forecast, largely on currency headwinds—though weakness in mining and construction in China is a factor as well.

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Hartford, Connecticut-based United Technologies slashed its 2015 earnings outlook for continuing operations, with a cooling property market in China largely to blame.

With real estate investment, new construction starts and sold floor space all under pressure, the industrial giant warned this week that its equipment orders are down. New orders for its Otis elevator division tumbled 10 percent (United Technologies had expected a 5 percent increase) and new Chinese orders within the climate, controls and security segment were down 15 percent.

"In China, where the company once estimated it had 25 percent of the market, Otis now probably has less than 15," said Greg Hayes, United Technologies' chief executive, on an earnings call.

China's also having a huge effect on commodities like copper, nickel, aluminum, iron ore and coal. It is both the biggest producer and consumer of industrial metals in the world.

The country's economy has a doubly negative effect on commodities: As domestic demand for steel has slipped, Chinese exports have escalated to a record high, flooding global markets with excess supply. While discussing Allegheny Technologies' quarterly loss, the specialty-metal maker's chief executive, Rich Harshman, blamed the surge of cheaply priced Chinese imports of stainless steel products for "significant pressure on base selling prices."

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U.S. steelmaker Nucor also discussed pricing pressure from a torrent of imports, on the heels of its results, as did Steel Dynamics.

And when metals producer Alcoa unofficially kicked off earnings season earlier this month, it boosted its forecast for a global aluminum surplus, blaming China for "the lack of follow-through on curtailments on unprofitable operating capacity," even in the face of lower prices.

But it's not just companies catering to the industrial complex feeling headwinds. The country is such a key market for fast food conglomerate Yum Brands that it led the company's recent earnings call discussion. "Same-store sales continue to show steady, but slower-than-expected progress," executives told analysts, adding that their top priority is to get the business in China back on track.

"We need to be more aggressive, more innovative and much more disruptive to ... change the business," Yum CEO Greg Creed said on the July 15 call. The umbrella company of the KFC, Taco Bell and Pizza Hut chains reported that operating profit declined 25 percent in China, as same-store sales plunged 10 percent.

Automakers also feel the pain—particularly since China is now the largest car market in the world. Auto sales there fell 2.3 percent in June year over year, a bigger decline than has been seen for more than two years. Volkswagen, which has heavy exposure in the country, cut its 2015 forecast for vehicle sales earlier this month.

Hyundai Motor said sales in China slumped 14 percent in the quarter. "Slashing our Chinese sales target looks inevitable," Lee Won-hee, Hyundai's finance chief, announced on Thursday's earnings call.

Health care also appears to be slowing down but not just because of the economy. Novartis CEO Joseph Jimenez says as the Chinese government has increased medical coverage it has been impactful. "We have seen slowing growth in China ... across every one of the segments," he said.

Then there's tech. Software company Microsoft noted macro conditions remain a challenge in "large opportunity markets" like Russia, Japan, Brazil and China.

When IBM this week reported revenue that missed analyst expectations, it was due largely to a drop in sales from the so-called BRIC countries of Brazil, Russia, India and China—including a 40 percent plunge in China as the company signed fewer large deals. Excluding currency effects and divested businesses, the Chinese segment fell 25 percent.

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VMware management told analysts and investors that the software maker saw a "significant slowdown" in its China business in the second quarter. The company expects it to remain a weak market for its products through the second half of the year.

Apple's earnings, reported Tuesday, revealed that despite chalking up 87 percent iPhone sales growth in China, the company feels some caution: "The turmoil in China could create some speed bumps in the near term," Apple CEO Tim Cook said on the company's earnings call.

When it comes to the long-term outlook, however, Cook is still optimistic. "Nothing that's happened has changed our fundamental view that China will be Apple's largest market at some point in the future," he said. However, that didn't stop analysts at Cowen from downgrading shares of Apple due to their fears on China.

All that said, it isn't just bad news for companies exposed to China. U.S. automaker General Motors, for example, insists it still sees China's growth potential. GM stuck to a forecast of generating about $2 billion in profit from China this year, despite warning that vehicle prices in China could decline about 5 to 6 percent.

"Our view for the year is that China is going to grow, the industry will grow in the low single-digit level, (the) industry grew 1 percent in first half, (and) we expect overall 2 to 3 percent for the year," General Motors CFO Chuck Stevens told CNBC.

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When Starbucks reported better-than-expected earnings this week, the coffee chain included an 11 percent increase in comparable sales in the China/Asia-Pacific market, as traffic in the region surged 10 percent.

Nike recently said that China returned to strong profitable growth as revenue topped $3 billion.

Carnival said that over time China will become the largest "source markets" for cruises as Chinese outbound travel is expected to double by 2020. The company announced Thursday that it's are sending two more ships into China for 2016.