Concerns about inflation are rising. Consumer prices increased 4.2% in April, which marked the largest year-over-year increase since September 2008 (5.0%). The rise in consumer inflation is being driven by higher energy prices, which jumped 25% compared to a year ago. Producer price inflation also came in higher than expected for the month. The April PPI was up 6.2%, which was the largest year-over-year increase since the U.S. Bureau of Labor Statistics began tracking this measure in 2010.
During each corporate earnings season, companies often comment on topics that had an impact on their earnings and revenues for a given quarter or may have an impact on earnings and revenues for future quarters. Given these concerns, have companies in the S&P 500 commented on inflation during their earnings conference calls for Q1?
To answer this question, 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 14.
Of these companies, 175 have cited the term “inflation” during their earnings calls for the first quarter. 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 163, which occurred in Q2 2018. In addition, the first quarter marked the largest year-over-year increase (+116) in the number of S&P 500 companies citing “inflation” on quarterly earnings calls going back to at least 2010 as well. With about 9% of the companies in the S&P 500 yet to report actual results for the first quarter, the total number will likely be higher than 175 once all the companies in the index have reported actual earnings and conducted earnings conference calls for the quarter.
At the sector level, the Industrials sector has the highest number of companies citing “inflation” on earnings calls for Q1 2021 at 46, followed by the Consumer Discretionary (25), Financials (22), Consumer Staples (21), and Materials (21) sectors. However, the Consumer Staples (84%) and Materials (75%) sectors have the highest percentages of companies that have cited “inflation” on their Q1 earnings calls from March 15 through May 14.
It is interesting to note that the estimated net profit margin for the S&P 500 for Q2 of 11.6% is above the estimate of 11.2% on March 31 but below the record-high net profit margin of 12.7% recorded in the previous quarter (Q1 2021).
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Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).
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