This earnings season, investors they will hear three words over and over again, and they are not “one great trimester!”
Until Tuesday, the executives of the companies of the S&P 500 they had mentioned the phrase “supply chain” about 3,000 times in calls with investors, a count that easily surpasses last year’s record. A new milestone will undoubtedly be set once the third quarter earnings season concludes right around Thanksgiving. From Tesla Inc. to Target Corp., the phrase has been spoken more frequently this year than even the buzzwords “synergy” and “value proposition” combined.
“The supply chain is taking center stage in earnings calls, as the supply chain is a mess,” said Scott Mushkin, analyst at R5 Capital. “Honestly, there is a possibility that the system will fail during the end of the year holidays.”
There are good reasons to be concerned. Businesses of all kinds are grappling with a global shortage of everything from cars to cotton, caused by factory closures, port traffic jams and a lack of truck drivers. The situation has worsened since the companies last reported results during the summer and a group of them, such as the electric giant Eaton Corp., has already warned Wall Street that their sales will be weaker than expected due to the insufficiency of supplies. Paint maker Sherwin-Williams Co. has cut its screening twice in a span of three weeks.
As the holiday gift shopping season fast approaches, the supply chain discussion has made its way all the way to the White House. President Joe Biden plans to meet with port officials and leaders from Walmart Inc. and Home Depot Inc. on Wednesday to discuss ways to ease congestion.
“Christmas items are waiting in ports,” said Stephanie Wissink, an analyst at Jefferies who covers retail and consumer products companies. “For retailers and brands alike, it’s a race against time.”
In the coming weeks, expect to hear many conversations about the supply chain in earnings calls, as retail company executives discuss how they have had to ship their own cargo ships to avoid bottlenecks, or have Apple Inc. management questioned by analysts about their iPhone production goal 13. The discussion, experts said, will not end soon.
“I don’t think we’ve reached the peak in terms of how bad it’s going to get,” said Brian Yarbrough, an analyst at Edward Jones.
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