One thing that’s for sure is that many companies are hesitant to get in front of bad news. Given that inflation in all forms is not going anywhere, we expect many companies to report Revenue and Earnings shortfalls in April as March quarter results and 2022 full year outlooks are communicated to investors.
Inflation has infected every element of the economy driving input costs higher for most every input. These inputs include wages, raw materials, third party software, you name it. Just look at the CPI and PPI over the past number of months. The result is COGS will increase putting downward pressure on Earnings. Further, Revenue is not above the fray. What’s different about 2022 as compared to 2021 is that companies are not as willing to eat 100% of input cost increases. Many have instituted price increases for their goods and services to offset input price increases, thereby making their goods and services more expensive to enterprise customers and consumers which will have a dampening effect on Revenue. The net effect is that we expect a significant number of companies across industries to take full year guidance down and/or to make 2022 Revenue and EPS guidance more back-end loaded. You can be sure that a certain few companies will have missed March quarter Revenue and EPS guidance. The latter group consists of CEOs and CFOs that were hoping against hope that inflation would have abated in the second half of the March quarter.