BOTTOMLINE: Supply pangs can spoil the earnings picture

Asia's Tech News Daily

BOTTOMLINE: Supply pangs can spoil the earnings picture
© Provided by CNBCTV18

Goods are in short supply. No, it is not just chips, it is even chemical based products, coal, gas and even daily intake items like milk and other foodstuff. The situation is quite peculiar and, unfortunately, not likely to be resolved very soon.

So, if you were hoping for bumper sales this festive season, think again. Electronic stores don’t have phones to vend, car dealers don’t have models in stock and in some western economies daily food items and even toilet paper stocks are running thin, prompting hoarding that is further adding pressuring supply.

The pandemic has thrown supply chains out of whack with shutdowns crimping supply, but demand being fuelled by income supporting paychecks, especially in the US, and the work-from-home phenomena. All items that go into homes are seeing a surge in demand, we keep hearing from retailers, and suppliers who’ve been caught off guard are scrambling to cope.

The global logistics picture has also got muddled with ships and containers not being available where they ought to be. The trade distortions and clogged ports have upset shipping schedules and broken the well-oiled supply chains, hitherto focused on delivering just-in time.

Then there’s also the energy picture: oil, gas, coal and power supply disruptions, some self-imposed, leading to a surge in energy prices. So, we have a predicament of rising prices, read inflation, and a supply situation that doesn’t look like its mending swiftly. And that should be a worry for investors in equities.

THE COMMODITY SURGE

Commodity prices have surged to their highest since 2014. The S&P GSCI index that tracks the most liquid commodities—crude, metals and even soft commodities—scaled to 590 in October from just about 400 at the end of calendar 2020, that’s a 50 percent surge. The gains on a year-to-date basis are a steeper 63 percent. Such a steep escalation is bound to impact overall inflation and pinch businesses and/or consumers.

What’s also important to note is that the index has mostly ranged between 300 to 450 over the past 7 years. And few, therefore, would have anticipated such a sharp spike beyond.

BOTTOMLINE: Supply pangs can spoil the earnings picture
© Provided by CNBCTV18

A look at the commodity price trend and inflation data historically suggests only a moderate but positive correlation of 0.6 for the S&P-GSCI and US CPI (consumer price inflation). A similar study of the S&P-500 and S&P-GSCI indicates almost no correlation. So equities may not collectively react to the surge. However, there is bound to be an impact in affected sectors.

BOTTOMLINE: Supply pangs can spoil the earnings picture
© Provided by CNBCTV18  

EARLY SIGNS OF MARGIN PRESSURE

A study of the early bird results of 161 non-financial sector companies listed on NSE reveals that 75 of them saw an operating profit (EBIDTA) margin decline quarter-on-quarter for the September ended quarter, while 78 witnessed a year-on-year decline. That’s a good 46-48 percent of the sample set.

Some of the notable names that witnessed margin pressure quarter-on-quarter include Asian Paints, Havells and Ultratech Cement. Even services players like Infosys and Wipro have seen cost pressures, though these seem driven by the shortage of manpower, not goods.

What we need to be cognizant of, is that given these early signs, the impact of such input cost pressures and supply disruptions can get accentuated in the coming quarters. This, because the supply chain issues in many sectors like electronics and automobiles and chemicals hasn’t shown any significant signs of easing yet, and many expect the problems to linger till well into 2022. If this is correct, expect sales to get capped by supplies and input costs to stay elevated. The key question, therefore, is whether the cost escalation can be passed on. My wager is, not entirely. And, if that’s so, expect both sales and margins to get dented going ahead.

REPRICING THE RISK

The new supply headwinds could well send analysts back to rework their numbers once this earnings season is done. And the revisions would likely be downward. The only thing that could keep the sentiment upbeat is a belief that this supply imbroglio and surging prices are transient and won’t impact estimates for the next fiscal, FY23, materially. And with most analysts rolling over price targets based on next fiscal’s earnings now, stock price tends may just skip this patch. That’s the optimistic view.

The pessimistic argument is that this inflation will not be as transitory as some imagine and that the Federal Reserve will need to start tapering and raising rates sooner than expected, and for longer than expected.

Whichever side you place your bets on, what you cannot ignore today is the pain the supply side is likely to inflict on businesses. How significant that will be, the jury is still out on.

Also Read – Supply chain crisis: Panic ordering by retailers worsening situation, impeding global growth

Internet Explorer Channel Network
Asia's Tech News Daily
News Related

OTHER NEWS

Fugitive diamantaire Mehul Choksi fears he may be kidnapped again

Fugitive diamantaire Mehul Choksi fears that he might be kidnapped again and may be taken to Guyana, from where he may be taken away in an unlawful and illegal manner. ... Read more »

Joyful reunions as Malaysia-Singapore land border reopens

1 / 7Virus Outbreak Malaysia SingaporeA woman is greeted by her relative as she arrives from Singapore at Larkin bus station in Johor Bahru, Malaysia, Monday, Nov. 29, 2021. Malaysia ... Read more »

China foreign exchange regulator fines Tencent's Tenpay for misconduct

FILE PHOTO: A Tencent logo is seen at its booth at the 2020 China International Fair for Trade in Services (CIFTIS) in Beijing SHANGHAI (Reuters) – China's foreign exchange regulator ... Read more »

Ramaphosa urges unvaccinated citizens to get jab, SA stays on level 1 lockdown

© GCIS. FILE: President Cyril Ramaphosa addressing the nation on 11 July 2021. CAPE TOWN – South Africa will remain on lockdown alert level 1. President Cyril Ramaphosa made the ... Read more »

Ravens have no excuses not to win AFC North

© Provided by Fansided The Baltimore Ravens have had their issues this season but they still sit with the No. 1 seed in the AFC so the AFC North should ... Read more »

Browns fans ready to cut Baker Mayfield yesterday after ugly SNF loss

© Provided by Fansided Cleveland Browns fans were fed up with quarterback Baker Mayfield’s play against the Baltimore Ravens. The Cleveland Browns needed to win on Sunday night to really ... Read more »

Drilon: Probable cause already established to prompt Ombudsman probe vs. Pharmally execs, gov't officials

© Screen grab/Senate PRIB Senate Minority Leader Franklin Drilon during the virtual hearing of the Senate finance committee on Sept. 17, 2020. (Screen grab/Senate PRIB) Senate Minority Leader Franklin Drilon said ... Read more »

IPL 2022 mega auction date, retention rules, list of players retained by franchises, salary purse - Latest updates

© Provided by DNA The IPL 2022 mega auction is expected to be held in January, according to reports and the IPL 2022 Mega Auction will include several talented players ... Read more »

DOJ prosecutors attack Bannon for wanting to publicize evidence against him

Prosecutors in the case against former President Donald Trump’s ex-adviser Steve Bannon have accused him of attempting to try his criminal case through the media instead of in court, saying ... Read more »

Inside the 'big wave' of misinformation targeted at Latinos

WASHINGTON (AP) — Before last year’s presidential election, Facebook ads targeting Latino voters described Joe Biden as a communist. During his inauguration, another conspiracy theory spread online and on Spanish-language ... Read more »

Scott Morrison hints at the date of the next federal election

© Provided by Daily Mail MailOnline logo Scott Morrison has dropped his biggest hint yet that the election will be in May. The Government on Monday released its proposed calendar ... Read more »

Bears maintain grip on market: What's dragging indices lower?

NEW DELHI: Bears tightened their grip on the market in early trade on Monday as concerns over the new coronavirus variant detected in South Africa made everyone nervous. The outbreak ... Read more »

Japan bans entry of foreign visitors as omicron variant spreads

Japan announced that it will suspend entry of all foreign visitors into the country as a new COVID-19 variant spreads. Prime Minister Fumio Kishida said the measure will take effect ... Read more »

Japan to reinstate ban on foreign visitors, G7 to meet over new Covid-19 variant

© STR/Jiji Press via AFP Japan, the world’s third-biggest economy, will close its borders to all foreigners, while Australia’s plans to re-open to skilled migrants were also in doubt as ... Read more »

Bianca Umali continues to dream big as she renews contract with GMA Artist Center

Bianca umali renews contract with gma Bianca Umali continues to call GMA her home as she renews her contract on Thursday, Nov. 18. The actress is celebrating her 13th anniversary ... Read more »

Country diary: The underground secret by Hadrian's Wall

Read more »

Heavy to very heavy rains expected in Gujarat this week, IMD issues ‘orange' alert

© Provided by DNA The unseasonal monsoons of India will be continuing well into December, as per the latest weather forecast by the Indian Meteorological Department (IMD). The IMD has ... Read more »

Sovereign Gold Bond Scheme 2021-22 Series VIII opens today, November 29: Here's your chance to buy gold at great prices for 5 days

© Provided by Zee News New Delhi: The Sovereign Gold Bond Scheme 2021-22 – Series- VIII or the eighth tranche will be open for subscription from today (Monday, November 29). ... Read more »

BREAKING: Government ready to discuss, reply on all issues in Parliament, says PM Narendra Modi

© Provided by Zee News New Delhi: Prime Minister Narendra Modi on Monday said that his government is ready to reply to all questions in Parliament but asserted that the ... Read more »

IIFT Admit Card 2022: NTA releases admit card @ iift.nta.nic.in, here's direct link to check

IIFT Admit Card 2022: NTA releases admit card @ iift.nta.nic.in, here’s direct link to check IIFT Admit card 2022: The National Testing Agency(NTA) has released the IIFT MBA 2022 admit ... Read more »

Nehha Pendse`s dance and workout regime is all you need to witness today

© Provided by Mid-Day Nehha Pendse, the ex-Bigg Boss contestant, has been an inspiration to many! Courtesy: her fitness regime. The actress, who became a household name with her stint ... Read more »

Bihar Police, Homeguard driver constable DET admit card update at CSBC portal

The driving efficiency test (DET) admit card for Bihar Police driver constable and Homeguard Constable Driver pwill be released on November 30, the Central Selection Board of Constable (CSBC) said ... Read more »

Delhi-NCR keeps combating 'very poor' air quality, AQI still around 370

© Provided by Zee News Delhi-NCR woke up to a foggy Monday morning with its minimum temperature settling at 10 degrees celsius and an overall Air Quality Index (AQI) of ... Read more »

Dominic Drakes: 'I don't want to look back and say I had a better 2021 than 2022. I don't want to be stagnant'

© CPL T20 via Getty Images Dominic Drakes was the player of the CPL final for his unbeaten 24-ball 48, which gave St Kitts and Nevis Patriots a three-wicket win ... Read more »

Are Shoaib Malik, Sania Mirza Retiring Soon? Here's How They Responded

© Provided by News18 Pakistani cricketer Shoaib Malik and his wife and Indian tennis star Sania Mirza have revealed their plans for retirement from their respective games. The couple was ... Read more »

Kellogg's to resume talks with striking workers a week after threatening to hire permanent replacements

Kellogg’s will return to the negotiating table with striking plant workers this week despite earlier threatening to replace them all. © Emily Elconin/Reuters Kellogg’s workers picket outside the cereal maker’s ... Read more »

'This is not a photo opportunity': Warning issued after teens seen doing handstands at level crossing

Network Rail has issued a safety warning after CCTV captured two teenage girls doing handstands at a level crossing. © PA A teenage girl doing a handstand at a level ... Read more »

Asian stocks fall further after new virus variant spreads

The Associated PressA man walks past an electronic stock board of a securities firm in Tokyo, Monday, Nov. 29, 2021. Asian stock markets fell further Monday after the omicron variant ... Read more »

Interfaith love a risk amid India's Hindu nationalist surge

The Associated PressNazima Shaikh, mother of Arbaz Mullah weeps as she speaks to the Associated Press at her home in Belagavi, India, Oct. 6, 2021. Arbaz Mullah was a Muslim ... Read more »

Ramaphosa: Omicron proves that fourth wave is coming

© Provided by eNCA JOHANNESBURG – The emergence of the Omicron variant and the exponential rise in COVID-19 infections in South Africa shows that the fourth wave is imminent and may ... Read more »

Top five nutrient-dense foods you must include in your daily diet

© Provided by The Indian Express Ageing is a natural process, but with it, the body’s requirements change. This is why experts recommend including nutritious foods in one diet and ... Read more »

Ministers meet in Calais to discuss migrants

Many migrants at this northern French camp say they still want to make the perilous crossing to Britain, despite the capsizing of a dinghy last week that claimed the lives ... Read more »

Kundali Bhagya actor Sanjay Gagnani gets married, arrives in vintage car with baaraat. See pics

© Provided by Hindustan Times Kundali Bhagya actor Sanjay Gagnani got married on Sunday. Kundali Bhagya actor Sanjay Gagnani, who plays Prithvi Malhotra on the show, married Poonam Preet Bhatia ... Read more »

The Price of Vicky Kaushal And Katrina Kaif's Marital Home Will Blow Your Mind

© Provided by News18 From their wedding venue to D-day outfits, a lot has been said and written about rumoured couple Katrina Kaif and Vicky Kaushal’s impending marriage. Minute details ... Read more »

Salman Khan's Antim collects Rs 17 crore in first weekend

Salman Khan’s Antim: The Final Truth collected Rs 17 crore. Salman Khan and Aayush Sharma-starrer Antim: The Final Truth is making waves at the box office. The film received a ... Read more »

KBC 13: Here's how Amitabh Bachchan prepared for his granddaughter Navya Nanda, Shweta Bachchan! - Watch

© Provided by Zee News New Delhi: The Bachchan family is set to rock the stage on Kaun Banega Crorepati 13! For this Friday’s episode, host Amitabh Bachchan will be ... Read more »

Atrangi Re song Chaka Chak: Sara Ali Khan tries to win Dhanush over with her seductive power moves – watch video

© Provided by BollywoodLife.com A new song from Akshay Kumar, Sara Ali Khan and Dhanush starrer Atrangi Re is out. Chaka Chak is a dance number by Shreya Ghoshal and ... Read more »

Covid news live: WHO races to assess severity of Omicron variant as Japan shuts borders

LIVE – Updated at 05:09 © AFP via Getty Images GettyImages-1234040785.jpg The WHO says it is not yet clear whether Omicron is more transmissible than other Covid variants, including Delta, ... Read more »

Everton analysis - Rafa Benitez decision baffles everyone as Abdoulaye Doucoure risk backfires

Missing substitutions Granted, Everton have injuries at the minute and are missing key players. But looking at the selection of substitutions available to Rafa Benitez for this match, it is ... Read more »

Horoskop: Diese Sternzeichen erwartet der beste vs. schlimmste Dezember 2021

© Getty Images Horoskop: So wird der Dezember 2021 für jedes Sternzeichen Getty Images Der letzte Monat des Jahres steht in den Startlöchern und mit dem Dezember erwarten uns jede ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic