Inflation: Firms Passing On Higher Costs

AmEx just out with comments, saying "We have seen credit indicators deteriorate beyond our expectations" and it was "too early to assess the impact of deteriorating credit indicators." Down about 1 percent.

Monsanto beat earnings expectations, though revenues were a bit light they were 26 percent higher than the same period last year. Everything generated more revenue: Roundup, and soybean, corn and cotton seed. They raised full year guidance (there is only another quarter left in their fiscal year)

Inflation watch:

1) General Millsearnings were in line with expectations. Interesting to look at the mix: domestic retail operations grew 7 percent, of which 3 points were due to growth, and the remaining 4 points due to price increases. International business up 21 percent, of which volume growth was 6 points, price and mix were 6 points, and a favorable currency were 9 points of the gain. Bottom line: price increases are a significant part of growth, but domestically and internationally.

As for inflation, they noted that they are expecting supply chain costs to increase 9 percent in 2009; their projected earnings growth of 7-9 percent is still quite healthy, though at $3.78-$3.83 is slightly below analyst estimates of $3.84.

2) Despite all the kvetching about high raw material costs, some companies are indeed able to pass on higher costs, and more. Look at Dean Foods : they raised their second quarter guidance, and went out of their way to note that the gain was largely due to "effective management of the pass through of increased dairy commodity and energy costs."

3) Brazil's central bank raises inflation forecast to 6% from 4.6%.


--Rockwell Automation has lowered its annual earnings guidance, noting that the company had experienced slower than expected growth in Europe and the U.S. in the past several weeks. Down 8 percent

--Barclays the latest European bank (after Royal Bank of Scotland and HBOS) looking to raise money, $8.85 billion through a share issue. It's being sold to current investors who can buy 3 shares for every 14 now held.

--Best Buy increased its dividend by 1 cent, to 14 cents, but its yield is still a relatively small 1.3 percent.

Boeing down 3 percent pre open (near a two-year low) as Goldman Sachs slapped a Sell rating on it. While the downgrade is due partly to the general observation of "continued weakness in the economy, continued high fuel prices, and our view that Aerospace stocks underperform when both occur simultaneously," they also went on to take a specific shot at Boeing's critical 787 business: "we believe there is more risk to the 787 program than is currently priced in as the program has yet to even enter flight test, where historically most issues on development aircraft are found."

Questions? Comments?