Price increases S&P 500 saves income growth from rising labor costs

Price increases S&P 500 saves income growth from rising labor costs

Labor shortages and rising labor costs are affecting the S&P 500 company’s revenue and earnings. But they do not significantly affect revenue growth, as these companies have the ability to set pricing to send higher costs to consumers.

This is according to FactSet, which closely follows the financial reports of publicly traded companies, including the S&P 500 members, to find out the top and bottom line trends that are shifting to Wall Street.

“Labor costs and deficits have been cited by the largest number of companies in the index to date as a factor that either had a negative impact on earnings or revenue in the second quarter, or is expected to have a negative impact on earnings or revenue in the next quarter,” said Factset’s vice president and Says senior income analyst John Butters. “Of these 18 companies, 11 (61%) discussed a negative impact from this factor. After labor shortages and costs, supply chain costs and disruptions were discussed by the second-highest number of S&P 500 companies (10).”

Although they come from a small sample, Factset’s results are consistent with the Bureau of Labor Statistics (BLS) report released last week. They show that as the U.S. labor market heats up in the colder economy, wages rose at an annual rate of 5.1% in June, ahead of Wall Street expectations.

This is an unusual situation. The labor market should follow the rest of the economy without going the other way. Ira S. Wolf, president and chief Googleization officer at Success Performance Solutions, blames population change and the growing gap in efficiency. “Unemployment rates are close to zero for many roles in technology, manufacturing, construction, education and healthcare,” he said. International Business Times In an email, “Although recruitment may slow down due to an economic downturn, it will not stop. Unemployed people still have far more job opportunities than those willing or able to fill them. Even if a company stops hiring, there are still open positions to fill.” There will be. The demand for technology, infrastructure and healthcare will not decrease. “

However, these wage increases do not seem to have a significant impact on corporate income growth, as reporting companies have been able to incur higher costs to consumers in the form of price increases, according to Factset. “It is interesting to note that despite the negative impact cited by these 18 companies, they reported an increase in overall (year-over-year) revenue of 11.0% and an average (year-over-year) increase of 8.5% in the second quarter. Butters adds: “These two numbers are above Q2’s current (mixed) revenue growth rate for the index as a whole, above 4.3%. It appears that most of these companies are raising prices to offset these negative effects, as 16 (89%) of these 18 companies have discussed raising prices or improving pricing in their earnings calls. “

But the situation may be different outside the S&P 500 members, especially among smaller companies, which operate in a highly competitive environment and therefore do not have the capacity to raise prices.

Stock market nyse Nasdaq S&P 500 news biggest gainer The technology sector has achieved a record on the S&P 500 index. Photo: A man with an umbrella walks past the New York Stock Exchange. Photo: Reuters

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