Commodity prices being at 10-year highs is a good thing if you’re a producer, but they matter even if you’re investing elsewhere.

The most recent earnings quarter season in the US was a bumper time even compared to the preceding bumper quarter.

The MSCI World Q2 earnings per share is up 6.4% quarter on quarter and Nasdaq 100 EPS is up 7%.

While it is early days in Australia’s own earnings season, there’s little sign that it’ll be a poor one. A good indicator was Commonwealth Bank (ASX:CBA) more than doubling its dividend.

Saxo Bank says it’s clear that GDP growth is flowing through to corporate earnings.

Nevertheless Saxo is still warning that the next earnings season might not be as positive all thanks to commodity prices, and it is taking a hint from one particular company.


Unilever hit by commodity price increases

Consumer goods maker Unilever’s (LON:ULVR) most recent earnings are a good example of how commodity prices can have a ripple-down effect.

The surge in commodity prices (even things such as plastic, tea and nuts), pushed by pandemic demand and shaky supply chains, led to the company cutting its full-year operating margin forecast.

While Unilever already began to raise prices before the announcement, this has begun to weaken sales in emerging markets, particularly Brazil.

Its shares fell over 5% on the day it released its results.

Saxo Bank’s head of equity strategy Peter Ganry says while Unilever is one of the few companies saying it’s under pressure, others could be feeling the heat. Particularly those that hinted at supply chain disruptions, even if they are currently able to manage them.

“This might be an early warning of what’s to come,” he said.

“We believe higher commodity prices and their potential negative impact on corporate earnings is a Q4 earnings season worry.”

Ganry’s warning came even as he admitted out earnings have fully recovered and are now well above their pre-Covid level.

“It underscores that the underlying concerns about economic growth are currently weighing more than a slightly lower discount rate on cash flows,” he said.

(Image: Saxo Bank)