Analysis-U.S. company results could shed light on inflation issues in the industrial and materials sectors

On October 6, 2021, a professional trader is working in a booth on the floor of the New York Stock Exchange (NYSE) in New York City, USA.Reuters / Brendan MacDermid

October 21, 2021

Luis Klauskov

New York (Reuters) – Business performance in the industry and materials sector is a snapshot of how companies in key areas of the US economy are dealing with inflation spikes, supply chain bottlenecks, and rising commodity prices. May provide.

Companies in these sectors, including logistics and transportation companies, major chemical manufacturers, aerospace, automotive and construction industry manufacturers and suppliers, are expected to perform strongly in the third quarter.

However, their position in the global economy has given many companies in the industrial and materials sectors a surge in economic resumption, resulting in higher input costs, supply chain disruptions, and the United States and other countries. Requests giving a window to fallouts from other issues that have plagued us.

Despite guarantees that the recent rise from the Federal Reserve Board is likely to be temporary, companies continue to raise costs or expect inflation and logistics turmoil to continue The signs may reinforce the view that recent rises in consumer prices prove to be more sustainable than expected.

Supply chain and inflation issues have spread to a wide range of companies, from technology companies to consumer goods companies.

Many industries and materials companies are already communicating the challenges they are facing. At an investor meeting last month, 3M, a diverse manufacturer, pointed out that inflation will be higher than expected due to cost pressures on resin, wood pulp and labor. Eaton Corp warned last month that third-quarter earnings were “slightly below the lower end of the forecast,” primarily because it “cannot meet the demand we are getting.”

Last month, paint and coating company Sherwin-Williams lowered its 2021 sales and revenue estimates because of “raw material availability challenges and rising inflation headwinds.”

Joshua Aguilar, a US multi-industry analyst at Morningstar, said: “Your short-term business will feel it first, but no one is immune. Ideally, you need someone who has a pricing lever to offset it.”

Investors will learn more in the coming days as corporate reports arrive on Thursday for Dow, next week’s 3M, General Electric, Caterpillar and more.

Industry and materials were among the economically sensitive circulating strains after breakthrough vaccine data last November gave optimism about the economic ability to break out of the coronavirus pandemic.

Investors say that while energy and finance continue to shine among these economically sensitive groups, concerns about how rising prices and declines due to supply chain problems will affect profits. Is squeezing the share of industry and materials.

Overall, the S & P 500 increased by 14% since the end of the first quarter, while the S & P 500 industrial sector grew by about 6% and the materials sector by about 8%.

“I know this quarter was hit by these margin issues, but will this continue for the next two quarters or a quarter event?” Greenwood Capital, South Carolina Walter Todd, Chief Investment Officer of the company, said. “It’s a real unknown at this point, and it … will facilitate the reaction of these strains.”

Industry accounts for 8% of the total S & P 500 index and materials account for 2.5%.

Some investors believe that companies in this sector could be more lucrative if they can survive rising costs, especially with strong pricing power for their products.

Ryan Cope, portfolio manager at American Century Investments, holds a stake in bearing maker Timken Co in his small cap value portfolio.

“Companies that have pricing power in their business model will start to perform much better than those that don’t,” said Corp.

(Report by Lewis Krauskopf; edited by Ira Iosebashvili and Diane Craft)

Analysis-U.S. company results could shed light on inflation issues in the industrial and materials sectors

Source link Analysis-U.S. company results could shed light on inflation issues in the industrial and materials sectors

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