Nearly 75% of S&P 500 Companies Are Citing “Inflation” on Q4 Earnings Calls

The market continues to be concerned about higher inflation. Consumer prices increased by 7.5% in January, which was the 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 fourth quarter?

Inflation Mentions Dominate Q4 Earnings Calls

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 December 15 through February 10.

Of these 337 companies, 246 have cited the term “inflation” during their earnings calls for the fourth quarter, which is well above the five-year average of 144. This is the second 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 current record is 305, which occurred in Q3 2021. However, there are still about 140 S&P 500 companies that have not reported actual earnings for the fourth quarter to date, so the final number will likely finish even higher.

In fact, it should be noted that 73% of the S&P 500 companies (246 out of 337) that have conducted earnings calls for the fourth quarter (through February 10) have cited “inflation” during the call. This is the highest percentage of S&P 500 companies citing “inflation” on earnings calls also going back to at least 2010. The current record is 62%, which occurred in Q3 2021.

At the sector level, the Industrials (50) and Financials (49) sectors have the highest number of companies that cited “inflation” on earnings calls for Q4. On the other hand, the Consumer Staples (100%) and Materials (90%) sectors have the highest percentages of companies that cited “inflation” on their Q4 earnings calls during this period.

Has Inflation Changed Net Profit Margin Expectations?

Given the high number of S&P 500 companies that have cited “inflation” on Q4 earnings calls, have net profit margin expectations for the S&P 500 for Q1 2022 and CY 2022 been revised? The current net profit margin estimate of 12.3% for Q1 2022 is slightly below the estimate of 12.4% on December 31, while the current net profit margin estimate of 12.7% for CY 2022 is slightly below estimate of 12.8% on December 31.

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