The Call @ Hedgeye | August 10, 2022

Below is a chart and brief excerpt from today's Early Look written by Industrials analyst Jay Van Sciver. 

Supply constraints on production look to be easing. This week’s ISM Manufacturing report showed a sharp decline in its Supplier Deliveries Index to its lowest level in over a year.  As declines in that reading translate to manufacturing lines and shop floors, the impact on manufacturing profitability may prove wildly underestimated.

Equipment prices in backlog are up much more than the pricing reflected in the (easy) 2021 compares; higher priced orders have already been taken in recent months.  If input costs turn disinflationary and production volumes increases, manufacturers may see margins move sharply higher.  We’ll get the confluence of higher production, which lowers unit costs and increases revenue, with some of the most robust pricing we’ve seen in decades. 

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