- With reporting season now underway, just how badly American companies listed on the S&P 500 have been hit by a quarter marked by supply chain woes, soaring commodity costs and conflict in Ukraine, will soon become apparent.
- Although revenues at S&P 500 companies have continued to grow, high inflation and sharp increases in energy prices have crimped margins.
Like watching a car crash in slow motion, a combination of factors look set to roil the otherwise ebullient mood for U.S. equities – from conflict to costs, once fat margins may soon be squeezed.
With reporting season now underway, just how badly American companies listed on the S&P 500 have been hit by a quarter marked by supply chain woes, soaring commodity costs and conflict in Ukraine, will soon become apparent
Data from FactSet suggests that the companies which have come to represent the American economy are set to report average earnings per share growth of just 5.2%, a sharp pullback from the 32% growth in the fourth quarter of last year and the most sluggish pace of expansion since the final three months of 2020, when the pandemic was raging.
Although revenues at S&P 500 companies have continued to grow, high inflation and sharp increases in energy prices have crimped margins.
The energy sector has been the standout of the S&P 500, as surging oil prices have helped boost revenue and earnings, with the industry forecast to report a whopping 255% earnings growth and revenue predicted to rise by 45% compared to a year earlier.
If forecasts for the past quarter are on target, this would only be the third time in the last three decades that contracting net margins met double-digit sales growth, with the last two being recessionary periods in 2008 and the fourth quarter of 2011, according to Goldman Sachs.
That all is not well has been reflected by economically-sensitive bank stocks, with JPMorgan Chase (-0.93%), Citigroup (+1.56%), Goldman Sachs and Morgan Stanley (+0.75%) all reporting declines in profits as dealmaking activity slowed and lenders bolstered provisions for potential credit losses.
