Monday Musings: November 1, 2021

Nov 01, 2021


Public Trust Credit Team
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The hot new buzzword of this earnings season? Supply chain

Earnings are about halfway done and one thing is clear – companies are talking non-stop about their supply chains. Earnings have been about 12% higher than expectations this quarter, less of a beat than we have seen in prior quarters likely due to revised analyst expectations. Anecdotally, companies feel as though they are referencing supply problems more often this quarter than prior quarters which is no surprise. Across the board, guidance was lower than the street expected and forecasts for global shipments are being slashed by delays across the global supply chain.  Just last week, the expectation for global smartphone shipments was revised from -6% growth to -12%, all due to the semiconductor shortage. According to our analysis and Bloomberg, executives have used the term ‘supply chain’ on earnings calls about 4,000 times so far, already drastically higher than Q2 2020, the previous high for the phrase, with 2,400 mentions. 

In addition to supply-side snafus, companies are almost universally reporting strong customer demand and strong pricing, signaling that inflation is likely to persist until supply-side constraints are worked through or demand begins to decline. The companies in our approved universe have all had strong reports so far, and we do not expect that supply chain issues will have a long-term impact; however, delays and rising input costs will likely keep a cap on expected near-term financial performance while keeping market news volatile.

All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. The information presented should not be used in making any investment decisions. This material is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

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