Dear Reader,
Merriam-Webster defines "red herring" as "something that distracts attention from the real issue."
Nike reported quarterly earnings Monday that exceeded analysts' expectations.
You're well aware that when a company's gross profit margin increases, its sales are rising faster than costs, which means profitability is increasing.
This is interesting news because companies have been complaining recently about how cost inflation is hurting business.
In June, FactSet first reported that citations of "inflation" on quarterly earnings calls jumped to their highest level going back to at least 2010.
However, the concern that rising costs would crush corporate profit margins has — so far — proven to be a gigantic red herring.S&P 500 companies reported record-level profit margins quarter after quarter in 2021.
In what was perhaps the most surprising prediction for 2022, analysts had predicted profit margins for S&P 500 companies would continue to expand for the entire year.
So while inflation is hitting consumers in their pocketbooks, it appears that stocks might be immune.
Don't get caught up in the headlines.
Post a Comment
Post a Comment