Americans now say they approve of free trade by 64%-27%, a margin of better than two to one. That's up from 57%-37% early in Trump's presidency, and 51%-41% near the end of...Politicsread more
Kudlow pointed to strong retail sales and low unemployment as signs that the U.S. economy remained strong.Marketsread more
The yield on the benchmark 10-year Treasury note briefly fell below the 2-year rate on Wednesday, a phenomenon in the bond market known as yield curve inversion, which is...Marketsread more
The MacBook Pro recall and its subsequent ban from flights underscores the increasing brand risk from problems with lithium-ion batteries.Technologyread more
Experts say the timing of Amazon executives' contributions to Rep. David Cicilline likely reflect the company's heightened urgency over growing regulatory scrutiny.Technologyread more
Despite aggressive strides, Waymo needs one thing before their self-driving cars become a seriously useful transportation system: people. We talked to the ones closest to it.Technologyread more
CNBC combed through Wall Street research to see which stocks are still a buy after their earnings reports.Marketsread more
Coinbase security chief Philip Martin explains, "Possession of a key is possession of your currency. What that means is that you can't revoke a cryptocurrency key, if that key...Technologyread more
Fraud investigator Harry Markopolos' accusations extended beyond GE's management to actuaries, auditors and analysts who he claims overlooked billions in liabilities.Marketsread more
The Supreme Court could strike down the constitutionality of the Consumer Financial Protection Bureau, an agency Elizabeth Warren has likened to her child and which Justice...2020 Electionsread more
Bianco Research's James Bianco suggests Wall Street is desperately looking for a signal that a 50 basis point cut is coming next month.Trading Nationread more
The tough economic environment of slowing growth and rising costs is setting up to benefit companies with one enviable attribute: pricing power.
The ability to "transfer higher input costs to consumers and maintain profitability relative to their competitors," is "an alpha factor" in a company amid a global growth slowdown and lower earnings guidance, according to Evercore ISI's analyst Dennis DeBusschere.
"We are concerned increasing input costs given productivity remains low, labor market demand high, wages are trending higher, and core inflation has been rising since late 2017. Firms with pricing power are likely to outperform their peers as global growth slows and earnings guidance remains negative," DeBusschere said in a note Wednesday.
U.S. companies have come under pressure as the borrowing costs keep rising and the tariffs resulted from the ongoing trade battles between the U.S. and China added to the burden. In an era of higher costs and increasing competition, the ability to increase prices without losing profitability becomes crucial.
Take Netflix. The media-screaming company hiked its subscription prices by a range of 13 to 18 percent on Jan. 15, sending its stock up 6.5 percent in intraday trading. The surge in the stock reinforces the importance of pricing power as Netflix managed to pass on the extra cost for its investment in original shows to its subscribers. The company reported better-than-expected earnings per share last week and its shares are up nearly 20 percent this month.
Evercore built an index consisting of 40 stocks that its analysts believe have the most pricing power. The index, with 32 percent weight in consumer discretionary and 15 percent in information technology, has outperformed a randomly generated portfolio by 19 percent since the start of 2018, DeBusschere said.
Bank of America and Lululemon are among the companies in Evercore's index. Bank of America reported better-than-expected profit and revenue for the fourth quarter last week, driven by a strong performance from its consumer-banking business and lower taxes. Lululemon raised its fourth-quarter outlook last week, saying it benefited from the best holiday season in six years.
The analysts picked Bank of America for the index because of its ability to "absorb increased deposit costs and pressured margins from rising short-term rates," according to Evercore.
To be sure, pricing power is only one of many factors dictating a stock's direction, and it only plays a leading role when overall corporate margin pressure is high.