Barclays has reviewed first-quarter earnings commentary from a cross-section of large-cap household and personal care companies and major beverage makers and concluded that, overall, these firms are largely keeping their profit forecasts intact despite mounting cost pressures.
In the bank's assessment, most companies held existing guidance rather than lowering expectations after reporting quarterly results. Only a small number of firms issued negative guidance revisions in the wake of their reports.
Household and personal care businesses tended to be explicit about how they expect to handle incremental cost pressures, telling Barclays that those added costs are incorporated into current forecasts and will be absorbed. Beverage companies were generally less precise in quantifying cost impacts, but most conveyed confidence in their outlook for the year.
On commodity inputs, Barclays analysts flagged oil prices near $110 per barrel in May, levels comparable to parts of 2022. The bank noted that many companies may now be operating with more hedging or contractual purchasing arrangements than they did during that earlier period - changes that could be attributable to timing issues tied to the pandemic or to updated risk management approaches adopted after the previous inflationary episode.
Companies described consumer demand trends with some granularity. Reports conveyed that higher-income segments of U.S. consumers appear resilient to the pressure of elevated prices, while firms emphasized the need to deliver clearer value propositions for lower-income shoppers. By contrast, the consumer environment in Europe was described in corporate reports as more pressured.
Executives outlined mitigation strategies intended to blunt the impact of rising input costs. These measures predominantly include hedging programs, efforts to drive productivity improvements, and the use of pricing actions only as a last resort. Barclays emphasized that assumptions around how and when cost pressures will resolve differ between companies, as do views on future oil prices.
The investment bank concluded with a caution: company plans rest on current base case macroeconomic assumptions, and those plans could change if the economic backdrop evolves in ways that depart from those assumptions.