S&P 500 CEO inflation rhetoric hits highest in 10 years

The debate may be raging over whether inflation is transient, but U.S. CEOs and CFOs haven’t been so concerned about rising prices for more than a decade.

“224 cited the term ‘inflation’ in their second quarter earnings calls. This is the highest total number of S&P 500 companies citing ‘inflation’ in earnings calls dating back to at least 2010, “John Butters, senior earnings analyst at FactSet, writes in his weekly memo.

GUNDLACH, BILLION FUND MANAGER TAKES DOWN “TRANSITIONAL” INFLATION

Digging deeper, Butters identified the areas that are climbing the worry wall the most.

“At the sectoral level, the industrial sector had the highest number of companies citing” inflation “during profit calls for the second quarter of 2021 at 50, followed by consumption
Discretionary (33), financial (29) and consumer staples (27) sectors, ”he detailed.

Some of those calls have coincided with gas prices hitting seven-year highs and record lumber prices, as well as government reports.

Consumer prices for the month of August jumped 5.3%, according to the Labor Department, matching the expectations of economists. Prices rose at an annual rate of 5.4% in July, matching the gain of the previous month, the fastest since August 2008.

Producer prices rose at the fastest annual pace on record for the fifth consecutive month in August, jumping 8.3% year-on-year as chain bottlenecks supply continue to stumble deliveries.

TYSON FOODS TACKLES “UNPRECEDENTED INFLATION”

Companies, including Tyson Foods and Kroger, have warned investors and consumers to prepare for price hikes.

Teleprinter Security Last Switch Switch %
KR THE KROGER CO. 40.94 +0.07 + 0.17%
TSN TYSON FOODS, INC. 75.81 +0.01 + 0.01%

Last week, America’s largest grocer reported that it “is passing higher costs on to the customer where it makes sense,” CFO Gary Millerchip said of the company’s second-quarter earnings, such as reported by FOX Business. Kroger sees inflation reaching 3%.

While uncertainty remains as to whether inflation will come down, it is not yet eating into growth in revenue or bottom line, Butters observes.

“The estimated profit growth rate for the year 2021 (42.6%) and the estimated net profit margin (12.4%) for the year 2021 are higher today compared to the estimates of June 30” , he added.

Still, Torsten Slok, chief economist at Apollo Global Management, points out that rising wages and impending labor shortages, record house prices and rising rents are troublesome foreshadows.

“I think the real risk here is that we could have an inflation problem that will last at least until the end of this year and potentially until next year,” he said during ‘a recent appearance at the “Barron’s Roundtable”.

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After the two-day Federal Reserve meeting, which ends on Wednesday, investors will receive another update on how the central bank views inflation. President Jerome Powell will certainly be shaken by this during his question-and-answer press conference on Wednesday, which begins at 2:30 p.m. ET.

Teleprinter Security Last Switch Switch %
COST COSTCO GROS CORP. 459.51 -3.80 -0.82%
NKE NIKE, INC. 156.42 -1.18 -0.75%
FDEX n / A n / A n / A n / A

Additionally, Costco, Nike and FedEx are all reporting earnings this week and may face inflationary trends in their respective businesses.

FED, NIKE, COSTCO, FEDEX TOP WEEK TO COME

Teleprinter Security Last Switch Switch %
SP500 S&P 500 4432.99 -40.76 -0.91%

Looking at the broader market, the S&P 500 is down 2% for September, which has traditionally been a tough month for stocks, but with rising inflation stocks could face a downturn. a double headwind in the coming weeks.

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