85% of S&P 500 Companies Are Citing “Inflation” on Q1 Earnings Calls

The market continues to be concerned about higher inflation. Consumer prices increased by 8.3% in April, which was the second largest (year-over-year) increase since 1982. In light of recent high inflation numbers, have more S&P 500 companies than normal commented on inflation during their earnings conference calls for the first quarter?

Searching for Mentions Across Conference Call Transcripts

FactSet Document Search (which allows users to search for key words or phrases across multiple document types) was used to answer this question. Through Document Search, FactSet searched for the term “inflation” in the conference call transcripts of all the S&P 500 companies that conducted earnings conference calls from March 15 through May 12.

Of these 445 companies, 377 have cited the term “inflation” during their earnings calls for the first quarter, which is well above the five-year average of 155. In fact, this is the highest overall number of S&P 500 companies citing “inflation” on earnings calls going back to at least 2010 (using current index constituents going back in time). The previous record was 356, which occurred in Q4 2021. However, there are still about 40 S&P 500 companies that have not reported actual earnings for the first quarter to date, so the final number will likely finish even higher.

It should also be noted that 85% of the S&P 500 companies (377 out of 445) that have conducted earnings calls for the first quarter (through May 12) have cited “inflation” during the call. This is also the highest percentage of S&P 500 companies citing “inflation” on earnings calls also going back to at least 2010. The previous record was 74%, which also occurred in Q4 2021.

At the sector level, the Industrials (62) and Financials (55) sectors have the highest number of companies citing “inflation” on earnings calls for Q1. On the other hand, the Materials (100%) and Consumer Staples (96%) sectors have the highest percentages of companies citing “inflation” on their Q1 earnings calls during this period.

Impact on Profit Margin Expectations

Given the high number of S&P 500 companies that have cited “inflation” on Q1 earnings calls, have net profit margin expectations for the S&P 500 for Q2 2022 and CY 2022 been revised? The current net profit margin estimate of 12.5% for Q2 2022 is below the estimate of 12.7% on March 31, while the current net profit margin estimate of 12.6% for CY 2022 is also below estimate of 12.7% on March 31.

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