News and analysis

The latest financial report from the well-known multinational leader in the consumer goods segment on April 20 showed all signs of the company's stable income. Revenue of $19.38 billion exceeded Wall Street's average expectations of expert pools by 3.5%, and it was also about 7% higher compared to the corresponding seasonal period of 2021, although certainly well below pre-Christmas record figures. Contrary to popular concerns that a heavy pressure of incoming costs is reducing the direct benefit of any manufacturer, earnings per share of $1.33 turned out to be 7 cents higher than a year ago. Distribution of health care items, like Oral-B and Pepto-Bismol, soared by 13%. 

Procter & Gamble (P&G) raised its full-year sales forecast confirming that sales for cleaning products and personal healthcare are resilient despite rising prices. For the fiscal year 2022, the company expects "organic revenue growth in the range of 6% to 7%" to beat the preliminary Reuters poll consensus of just 5.5%. P&G price rose by 3% immediately within the first hour after the opening bell on the day of the release and stopped only at 88 cents lower than the previous all-time peak of January 2022. Yet, it clearly will not rest on this height after adding 17.5% since January 2021. P&G chief financial officer, Andre Schulten, said his company might take a hit of one penny per share in the third quarter due to the war between Russia and Ukraine, while the impact may rise to four cents in the fourth quarter of 2022. Those remarks were related to the fact that P&G was ending its new capital investments in Russia and "significantly reducing" its portfolio to focus on basic hygiene, health, and personal care. The share of P&G's deliveries in Russia and Ukraine costs a little bit more than 1.5% of its global sales. 

Businesses which produce staples usually stand on firm ground during the time of severe inflation storms. They sell simple and necessary goods that people have gotten used to over the years. Housewives are unlikely to look for something and refuse to buy Pampers for their babies, for example, or to replace hygiene products like Tampax, Naturella, Always, the usual lines of Pantene, Wella and Head & Shoulders shampoos, Max Factor cosmetics or Fairy, Tide, Lenor, Comet and Mr Proper. If  their husbands use Gillette razors, they would most likely stand by that brand even if the retail price is raised , especially when other trademarks are also adding on extra charges also. Loyal customers of all these easily recognisable products are unlikely to change their behaviour just for the sake of some very small cost discounts which make other rival products cheaper because they have gotten use to taking care of their bodies in their preferred manner and are familiar with the ingredients used in these products.

Shares of this giant computer systems design company, which is also a world leader in graphic processor supplies, are trading with a 20% discount compared to their record peaks of $346.47 in November 2021. Market actions were clearly running ahead of the unfolding of the story at some point amid a global shortage of chips, which created a panic demand. During this time its shares fell below $210 for a few months, providing a good opportunity for a mid-term rally. 

The tailwind blowing with the continuing deficit of chips and rampant inflation worldwide pushed Nvidia shares by 40% above $280. Yet, the price still looks rather attractive. Acceleration of the uptrend was supported by the news that Nvidia and its Intel rival announced their common production plans. Jensen Huang, the chief executive of Nvidia, made a statement that his company is going to use Intel's industrial facilities to source more of Nvidia's designed chips. Intel CEO Pat Gelsinger commented soon after that his company is "thrilled for their interest in using our foundry capabilities", while adding that he had "no particular timeline" but Intel had "ongoing discussions" with Nvidia. The point is that Intel did not manage to distribute more Intel chips over the last two or three years and after this time it then decided to diversify its business by launching the so-called "foundry" projects. Nvidia does not want to miss this opportunity for its global expansion. 

"They're interested in us using their foundries. We're very interested in exploring it," Jensen Huang responded later. He even removed some scepticism about his company's willingness to make Nvidia technology explicit to competitors by saying that "Intel has known our secrets for years" because Nvidia has already been partnering with many companies including Intel, and so "trusting and working with industry partners is key" for Nvidia management. Some organisational aspects and technical details, including mutual coordination of supplies, may still take quite a long time, but that could benefit shares of both companies. The announcement of the co-operation with Intel pushed Nvidia stocks up by almost 10% the next day. However, in April these shares have a good potential to become as hot as they were in March.

Market prices of aluminium futures rolled down from its March 7 highs by more than 12%. However, that peak was updated recently and was seen to be closer to a similar price pattern last autumn when short-term downward movements stopped within three weeks and the rally resumed in December. Mining companies and distributors in the commodity sector, fortunately, are far from being a linear function of the current changes in market prices of commodities but they are certainly taking advantage of persisting high prices. 

The revenue of Alcoa for the Q4 2021 accounted for $3.34 billion. Its earnings of $2.5 per share is beating not only the average Wall Street expert forecasts of $1.93 but is also three times higher compared to Q1 2021, setting Alcoa’s all-time record. The next report is going to be released on April 14, which may increase investment appetites. 

Alcoa shares have already set fresh price records twice in March, exceeding the January peak levels by 150%. However, the company that produces bauxite, alumina, and which globally distributes aluminium products  may receive additional advantages from further fragmentation of the world's metal market after sanctions against Russia have definitely disrupted regular supplies and which are prompting spot and futures prices to rise. 

London wheat futures (LWBc1) rose to £307.50 per tonne by March 31. This is more than 35% higher than £226.5 recorded a couple of days before the start of military conflict in Ukraine. By the beginning of April wheat contracts were about 61.5% higher than in the same season a year ago. Barley was up by almost 44% during March 2022, while U.S. Corn Futures were almost a quarter more expensive than at the beginning of January. 

In some parts of the world there are food shortages due to crop failures and supply disruptions following the corona crisis. Top level politicians, including speakers of the French agriculture ministry and U.S. President Joe Biden, are referring to this as direct consequences of war as well as consequences of economic and financial sanctions that were placed on Russia. Russia and Ukraine together account for up to a quarter of global wheat exports and almost a fifth of all corn deliveries, as well as 12% of the total calories supplied to the world market, according to Bloomberg. These two countries produce grain at lower prices than North America and Europe. In recent days, Russian authorities have also been actively discussing options like selling resources for national currency or even only to "friendly countries". 

Anyway, even if food prices did partially stabilise, they probably remain high. One of the largest agricultural originations and processing companies, Archer-Daniels-Midland may further benefit from the situation. It offers sustainable nutrition for humans and animals, and it is also engaged in developing energy and bio-based alternatives. Big money may continue to lift the stock even though the ADM price is almost 40% higher compared to pre-Christmas dates. It could easily become the next hot stock. The company's cap now exceeds $50 billion, but it may become even higher before the release of the next quarterly report scheduled for May 3. ADM sales and earnings are growing at double-digit rates, as its one-year sales growth rate was 32.4%, and three-year equity per share (EPS) growth rate was above 19%. Nearly 9% of the short-term correction of the ADM shares which were priced down on March 25-29 have already met active demand, causing quotes to quickly recover more than half of the correction losses.