Inflation mentions rise during S&P 500 earnings calls

More than half of the S&P 500 companies have “cited the term ‘inflation’ during their earnings calls for the third quarter” according to a report released last week by financial data and software company FactSet. The report said 285 companies mentioned inflation on their earnings calls. The number rose to its highest in 10 years in the third quarter, as executives fret about the effect of rising prices on their businesses.

“In fact, this is the highest overall number of S&P 500 companies citing “inflation” on earnings calls going back to at least 2010,” FactSet Vice President and Senior Earnings Analyst John Butters wrote in the report. “The previous record was 222, which occurred in Q2 2021.”

Inflation hasn’t just been the hot topic of earnings calls. It has also dominated headlines and been the topic of many opinion and commentary pieces. Inflation has even influenced monetary policy, with the Federal Reserve potentially raising its benchmark short-term rate from zero as early as next year.

“Consumer prices increased 6.2% in October, which was the largest year-over-year increase since 1990,” Butters wrote in the report. “Producer prices rose 8.6% in October, which marked a tie with the previous month (September) for the largest year-over-year increase since the U.S. Bureau of Labor Statistics began tracking this measure in 2010.”

The list of companies that have mentioned inflation in their Q3 earnings calls could grow this week. 40 companies have yet to have their earnings call. This includes Home Depot and Walmart, which will report their results on Tuesday. Target will report its results on Wednesday and Macy’s will report earnings on Thursday. Also on Tuesday, Wall Street will get an update on consumer spending when the Commerce Department releases its retail sales report for October.

Despite a rise in costs to do business, a wide range of companies have shown they successfully navigated both the summer surge of COVID-19 cases and lingering supply chain problems. According to FactSet, S&P 500 companies are expected to post a net profit margin of 12.9% in Q3, and 11.8% in Q4. This implies companies have been able to pass rising costs along to the consumer. However, those consumers have also benefitted from higher wages. Last month, the Commerce Department reported a 1.5% wage jump for September. That is the highest jump seen in the department’s 20-year history of keeping such records.