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Digg
With commodity prices (oil, metals, food, cotton) continuing to rise, questions about pricing power are also on the increase. If companies don't have pricing power, they face margin challenges as input costs rise. Those with pricing power can deal with the challenge more effectively.
Brian Belski at Oppenheimer has cobbled together a report and screen aimed at identifying companies with some pricing juice, and those without, using CPI and PPI data. From a high level, here's how he breaks down the sectors:
Those with improving pricing power:
Airlines. Air fares are up four straight months.
Delivery services. Year-over-year price jumps double-digit since early 2010.
Prescription drugs. Prices up six consecutive months.
Toys. Prices up 1.1% in the last month, first increase in four months.
Apparel. Prices up three straight months.
Restaurants. Prices up 11 straight months in the face of sharply higher food costs.
Those struggling to raise prices:
Hotels. Prices down six of the last seven months.
Furniture. Prices down five of the past seven months.
New cars. Down four straight months, year-over-year prices negatives. Rising chatter of price wars.
Computers/peripheral. Prices down six straight months.
Appliances. Prices down “significantly” in two of the last four months.
Audio and video equipment. Prices down in five of the last seven months.
So, which stocks are showing pricing power based on gains in gross margin? Oppenheimer “examined quarterly trends within gross margins over the past year?including those that have increased gross margin in each of the past four quarters. The result:
Here are the top 10 in the Oppenheimer screen and their share performance year-to-date.
Halliburton +15.1%
Cigna +17.5%
Paccar -14.7%
UPS -1.1%
Express Scripts +2.2%
JDS Uniphase +76.5%
Constellation Brds -6.5%
Yahoo +1.1%
Watson Pharma +8.8%
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