Higher energy costs, massive labor costs ... and yet record-high profit margins? 🤑
All in all, things look favorable for earnings 📈
Energy prices spiked in March, and they have remained elevated ever since.
This dynamic is concerning for investors for two big reasons: 1) it raises the costs of producing goods and services, and 2) it pressures demand from customers who have less money to spend due to their own rising costs.
But we’re currently about a third of the way through Q1 earnings season, and most companies haven’t exactly been sounding the alarm on higher energy costs.
On the contrary, most companies are reporting strong earnings growth, analysts have been revising up their estimates for future earnings, and the stock market is trading near all-time highs.
What gives?
To begin to make sense of it all, we have to remember that energy represents just one of many costs for companies. And while some industries have a lot of exposure to energy prices, most have relatively low exposure.
Let’s take a closer look.
