Goldman screens companies with best and worst pricing power into earnings season
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Goldman Sachs equity strategists stressed the importance of pricing power for companies given a four-decade high in inflation and rising commodities prices.
"Pricing power will become increasingly important in the face of continued inflation and cost pressures," David Kostin, chief U.S. equity strategist, and team wrote in a note. "In order to assess the sustainability of margins, we will monitor the ability of firms to pass increased costs through to consumers."
Goldman screened the Russell 1000 (NYSEARCA:IWB) for companies in each sector with the best and worst pricing power.
These stocks have high and stable gross margins:
Communication Services (XLC)

Alphabet (GOOGL) (GOOG), average 5-year gross margin level 57%
Cable One (CABO), 48%

Consumer Discretionary (XLY)

Tapestry (TPR), 69%
PVH (PVH), 55%
Lululemon (LULU), 54%
O'Reilly Automotive (ORLY), 53%
Travel + Leisure (TNL), 49%
Skechers (SKX), 48%
Nike (NKE), 44%
Advance Auto Parts (AAP), 44%
Harley-Davidson (HOG), 41%
Burlington Stores (BURL), 39%
LKQ (LKQ), 37%

Consumer Staples (XLP)

Philip Morris International (PM), 65%
Coca-Cola (KO), 61%

Energy (XLE)

Baker Hughes (BKR), 18%
Schlumberger (SLB), 13%
Halliburton (HAL), 11%

Healthcare (XLV)

Edwards Lifesciences (EW), 75%
Align Technology (ALGN), 74%
J&J (JNJ), 67%
Zoetis (ZTS), 66%
Cooper Companies (COO), 62%
Waters (WAT), 58%
Mettler-Toledo (MTD), 56%

Industrials (XLI)

CoStar (CSGP), 76%
Nordson (NDSN), 55%
TransUnion (TRU), 53%
Graco (GGG), 53%
Verisk Analytics (VRSK), 52%
Snap-on (SNA), 51%
S&P Global (SPGI), 69%
Rollins (ROL), 47%
Cintas (CTAS), 46%
nVent Electric (NVT), 39%
Dover (DOV), 37%
Curtiss-Wright (CW), 36%
Fortune Brands (FBHS), 35%
Donaldson (DCI), 34%
ITT (ITT), 32%
Trane Technologies (TT), 31%

Info Tech (XLK)

Dolby (DLB), 88%
Cadence Design (CDNS), 87%
Adobe (ADBE), 85%
Synopsys (SNPS), 76%
Oracle (ORCL), 76%
Fortinet (FTNT), 76%
Workday (WDAY), 71%
Paychex (PAYX), 69%
Cisco Systems (CSCO), 63%
Monolithic Power (MPWR), 55%

Materials (XLB)
Corteva (CTVA), 36%
These stocks have low and variable gross margins:
Communication Services (XLC)

Live Nation (LYV), average 5-year gross margin level 17%
Madison Square Garden (MSGS), 32%
Disney (DIS), 33%

Consumer Discretionary (XLY)

Wynn Resorts (WYNN), 20%
Bright Horizons (BFAM), 21%
Six Flags (SIX), 31%
Las Vegas Sands (LVS), 31%
Marriott Vacations (VAC), 34%
Domino's (DPZ), 36%

Consumer Staples (XLP)

Hormel (HRL), 20%
Walgreens (WBA), 23%
Ingredion (INGR), 25%

Healthcare (XLV)

Sarepta Therapeutics (SRPT), NM
Alnylam Pharmaceuticals (ALNY), NM
Neurocrine Biosciences (NBIX), NM
Nektar Therapeutics (NKTR), NM
ICU Medical (ICUI), 40%
Viatris (VTRS), 41%
Premier (PINC), 55%

Industrials (XLI)

J.B. Hunt (JBHT), 11%
Lockheed Martin (LMT), 13%
General Dynamics (GD), 18%
Sunrun (RUN), 19%
Kirby (KEX), 19%
Huntington Ingalls (HII), 19%
Raytheon Technologies (RTX), 23%
GE (GE), 24%
Hexcel (HXL), 24%

Info Tech (XLK)

Avnet (AVT), 13%
DXC Technology (DXC), 15%
Euronet Worldwide (EEFT), 20%
Wolfspeed (WOLF), 29%
Block (SQ), 34%
Ceridian (CDAY), 41%
Fleetcor (FLT), 46%
Switch (SWCH), 45%
CDK Global (CDK), 49%
Wex (WEX), 50%
Marvell Tech (MRVL), 55%
Guidewire (GWRE), 55%

Materials (XLB)
CF Industries (CF), 20%
See what else Goldman Sachs wants to hear on earnings calls.