This earnings season will be tough as inflation erodes margins, Barclays says 2022/7/18 下午8:35

This earnings season

will be tough as
inflation erodes
margins, Barclays
says
PUBLISH ED FRI, JUL 15 2022 • 2:01 PM EDT

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This earnings season will be tough as inflation erodes margins, Barclays says 2022/7/18 下午8:35

Inflation will be a key headwind during Morg

an
the second-quarter earnings season as Stanl
higher prices eat into companies’ profit ey’s
Wils
margins, according to Barclays. on
predi
“In recent quarters, companies were cts
able to maintain margins by drawing the
S&P
down on inventories built up at lower 500
prices and by selling it to cash-rich trou
gh: It
consumers,” analyst Maneesh will
Deshpande wrote in a Thursday note, com
e
referring to wallets boosted by stimulus ‘pret
checks and built-up savings in the early ty
quic
days of the pandemic.
kly’

Now, however, inflation and commodity

Morn
prices are high, which is quickly burning ingst
through the stores of cash consumers ar
strat
had saved. This is keeping margins
egist
under pressure, even as the supply chain says
improves, Desphande wrote. two
FAA
NG
In June, the consumer price index was stoc
9.1%, the highest number in more than ks
look
40 years and more than economists incre
polled by Dow Jones expected. The dibly
chea
report also signaled that inflation didn’t p
peak earlier, as some expected. right
now
“High levels of inflation can hurt
margins as seen during 1970s-1980s
even as earnings growth is not affected
due to its nominal nature,” Deshpande
Morg
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This earnings season will be tough as inflation erodes margins, Barclays says 2022/7/18 下午8:35

wrote. “So, given the significant Morg

an
increase in recent realized inflation due Stanl
to supply chain disruptions and higher ey’s
CIO
commodity prices, some softening in
Mike
margins is expected.” Wils
on
This softening is likely to be seen in predi
cts
most sectors, except for those closely the
linked to commodities such as energy. S&P
500
trou
Still, even given margin pressure due to gh
inflation, Barclays expects S&P 500
earnings this quarter to be a weak Fed
surprise. The consensus earnings-per- expe
ctati
share forecast for the S&P 500 in the ons
current quarter is $55.40, which is gone
wild:
about 1% higher than actual EPS in the How
previous quarter, the firm found. rate
prici
“Consensus expectations just prior to ng
went
quarterly earnings season have finally so
become positive after a gap of 7 quarters craz
y
with 2Q22 QoQ EPS growth expected to this
be 1%,” said Deshpande. “However, wee
k
while SPX ex Energy earnings for future
quarters have declined they face further
downside as the economy slows while
the Fed likely tightens the fed fund rate
to 3.25-3.5% by year-end.”

—CNBC’s Michael Bloom contributed to

this story.

Thes
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