PPG Industries Warns of Intensifying Inflation Pressures and Weakening Demand

{Originally published on One-Twenty Two by Dr. Duru}

““As we look ahead, we currently do not anticipate any relief from inflationary cost pressures in the third quarter. We expect aggregate global economic growth to remain positive with end-use market activity comparable to the second quarter, adjusted for traditionally lower seasonal demand. However, uncertainties exist regarding global trade policies, which may create uneven demand by region and in certain industries. Specific to PPG, we expect that the previously announced architectural customer assortment change will lower our third quarter year-over-year sales volume growth rate by between 120 and 150 basis points. We remain confident that our leading-edge technologies and products, which are bringing value to our customers, will facilitate our growth going forward….

Currently the new tariffs are starting to add some modest cost to our raw materials. Based on the strength in the US dollar in the second quarter, we expect foreign currency exchange rates to have an unfavorable impact to our sales in the third quarter”

This was the essence of the guidance industrial paint company PPG Industries (PPG) provided in its 2nd quarter earnings report. I added the emphases because the warnings on inflation and international demand were clear precursors to the company’s pre-earnings warning tonight. The stock traded down about 10% in after market trading in response to significant cuts in revenue and earnings guidance. I was most interested in the explanation which made the second quarter’s caution come to life (emphases mine)…

““In the third quarter, we continued to experience significant raw material and elevating logistics cost inflation, including the effects from higher epoxy resin and increasing oil prices…These inflationary impacts increased during the quarter and, as a result, we experienced the highest level of cost inflation since the cycle began two years ago.

“Also, during the quarter, we saw overall demand in China soften, and we experienced weaker automotive refinish sales as several of our U.S. and European customers are carrying high inventory levels due to lower end-use market demand…Finally, the impact from weakening foreign currencies, primarily in emerging regions, has resulted in a year-over-year decrease in income of about $15 million. This lower demand, coupled with the currency effects, was impactful to our year-over-year earnings and is expected to continue for the balance of the year.”

Instead of moderating, inflationary pressures are mounting on PPG. The weakness in China is telling in the context of the trade war with the U.S. The lower “end-use market demand” points to the trickle-down impact of “peak auto.” These warnings are each important given PPG has a market cap of $26.5B and trailing 12-month revenue of $15.4B. I fully expect other industrial companies to deliver similar news this earnings season.

Interestingly, Credit Suisse downgraded the stock in late September and the market responded by taking PPG down 2.8% on relatively high trading volume. The gap down confirmed the end of PPG’s post-earnings run and breakout above 200-day moving average (DMA) resistance. Until the downgrade the stock finally looked ready to challenge its 2018 high.

PPG Industries (PPG) never quite recovered from the February swoon. The recent breakdowns below 50 and 200DMA supports now look like fresh warnings.
PPG Industries (PPG) never quite recovered from the February swoon. The recent breakdowns below 50 and 200DMA supports now look like fresh warnings.

Source: FreeStockCharts.comThe market is supposed to be a forward-looking mechanism, so it is natural to wonder why PPG was rallying so well in the first place. I do not put all the blame on investors. I assume the company itself was partially responsible through its sizable share repurchase program. For the first half of 2018, PPG spent $1.1B on its own shares: 4.1% of the company’s current market capitalization. With this kind of aggressiveness, PPG should quickly move in on the new 52-week low to add to take out even more shares.

As earnings season unfolds, I will be paying close attention to company commentary on trade woes and inflation. The stock market has spent most of the past several months ignoring risks, so there are a good group of over-priced stocks out there waiting their turn for a douse of realty. Collectively, these warnings could be the catalyst that delivers the oversold market conditions I am anticipating.

Full disclosure: no positions

Imperial Sugar squeezed by poor demand and high sugar prices

Last week, Imperial Sugar (IPSU) lost 59% of its value in one day after reporting extremely poor earnings. The stock has continued to sell-off over a week later losing an additional 20%. The reason? IPSU is experiencing the worst of all operating squeezes: higher input costs (sugar) and the inability to raise prices to accommodate those costs. In this case, competitive pressures are to blame.

From the earnings report:

“Our inability to increase prices in the face of higher raw sugar costs because of competitive pressures from domestic and Mexican sources was the principal driver of the quarter’s disappointing results,” commented John Sheptor, president and CEO of Imperial Sugar. “Raw sugar purchased during the quarter was priced largely against the March and May futures contracts, which peaked near $40 per hundredweight prior to the USDA import quota announcement in early April. The subsequent decline in the raw sugar futures market which occurred after the quota announcement was only temporary and the raw market has rallied back to near the same level. Our raw sugar costs in the fourth fiscal quarter should see little relief, while sales prices thus far in the fourth quarter have only improved modestly.”

Higher manufacturing costs also hurt operating results in the previous quarter.

Note that last week, the International Sugar Organization (ISO) confirmed that no relief is in sight from higher sugar prices.

IPSU crashes after reporting very disappointing earnings

IPSU crashes after reporting very disappointing earnings

Source: Stockcharts.com

Blue Nile hit by high diamond and metal prices

Diamond prices have been going up, and Blue Nile is feeling the pinch. The online diamond retailer highlighted high diamond prices as well as high metal prices in its latest earnings report (August 4, 2011):

“While we delivered record second quarter sales and non-GAAP adjusted EBITDA, our results were impacted by rapidly rising diamond and metal prices amid a weakening consumer environment in the U.S. Despite these external headwinds, we achieved sales growth across all product categories, including double-digit sales growth in the non-engagement category.”

Seagate warns that its margins are being hit by a “bubble” in rare earth prices

Hard disk manufacturer Seagate Technology reported earnings last night (July 20) and indicated that margins are getting hit by the rising prices of rare earths. Rare earth prices have risen particularly fast in the last 60 days. From the Seeking Alpha transcript of the earnings conference call:

“We do, however, expect a positive margin impact of a more stable pricing environment to be offset by the following factors: the costs of many upstream materials, especially rare earth elements, which have increased significantly. These costs are expected to adversely impact gross margins by at least 200 basis points…”

Seagate has been unable to offset these costs, but over the long-term believes there are no supply problems:

“In regards to the increasing cost of upstream materials, Seagate has historically been able to absorb these cost increases and insulate our customers. However, the recent dramatic increase in the cost of rare earth elements, combined with a pre-existing upward trend for a broad base of other commodities, far exceeds our ability to find offsetting cost reductions. While we are exploring opportunities to reduce the content of certain rare earth elements that are used in the manufacture of hard disk drive components, we will be discussing with our customers, passing through what we hope are temporary surcharges related to upstream earth-based commodities. It’s important to note that for the relevant rare earth materials, there does not appear to be a significant supply constraint. And while we have a short-term concern over margin impact, we do not currently have a long-term concern.”

During the Q&A session, Seagate management explained that rare earths are about 2% of the cost of a hard drive due to usage of rare earths in the the VCM magnet and the motor. Management also indicated there remains high uncertainty as to whether the company can pass on the higher costs of rare earths to customers although Seagate does not need to wait for demand of its drives to surpass supply in order to raise these prices.

Seagate appears very optimistic that no real supply issue exists with rare earths. Management is particularly optimistic that U.S. mines alone (presumable Molycorp?) will solve the problem and bring prices down. They even went so far as to call current prices a “bubble”:

“…it doesn’t appear that there’s a true supply constraint here. There’s a lot of dynamics around owners of rare earth materials and processors of rare earth materials and who is controlling inventories at what level, as opposed to there’s fundamentally some shortage. If there was fundamentally a shortage, then I would think that the fact that price is supposedly representing supply and demand. If you effectively reduce supply or enormously increase demand, that would mean that there’s a sustained increase in price. I think this feels a little bit like a bubble…So I think our point is that right now, since it doesn’t feel like there’s a fundamental supply issue, that it probably works itself out. And by the way, if these prices stay high, guess what, there’s a bunch of U.S.-based mines that are going to come online again, and it will solve itself. It’s not like the stuff doesn’t exist. It’s just that a lot of mines were closed down when the prices fell below $75, whatever the magic price is, and we’re well above that right now. So I don’t think it’s a long-term issue.”

Management compared the price run in rare earths to a run they experienced with ruthenium in 2006 that lasted for 2006. I do not know about the dynamics of that market. I will need to research more closely what happened in 2006 to understand the specific similarities to today’s rare earth market. Stay tuned…

Disclosure: Author is net long Molycorp (MCP)

Wendy’s/Arby’s Group plans to implement “prudent” and “strategic” price increases

Even fast food restaurants have determined that the market can accept some price hikes. In its latest earnings report, Wendy’s/Arby’s Group (WEN) provided an outlook that includes plans to implement “prudent” and “strategic” price increases to at least partially offset rising commodity prices, especially in beef (emphasis mine):

“We expect to generate strong sales growth at Wendy’s for the remainder of the year driven by exciting new product introductions, including hamburgers, chicken and salads, in addition to strategic price increases…Margins will be negatively impacted by increases in commodity costs primarily driven by unprecedented beef prices that are affecting the restaurant industry. We have reaffirmed our same-store sales outlook and expect to offset some of these commodity increases with prudent price increases, while protecting transactions and market share…”

WEN expects improved sales trends through the rest of the year, and this must help give them the confidence to raise prices.

The company’s confidence really shines through as management discusses future prospects further in light of higher commodity costs:

“Although we have revised our outlook for the year to reflect higher expected commodity costs, we continue to make significant strategic progress improving our core menu offerings including breakfast. We are also pleased with our progress developing Wendy’s international business, which represents a significant opportunity. The Arby’s turnaround is progressing nicely and we plan to resume our stock buyback program after the conclusion of the strategic alternatives process, subject to market conditions. As we’ve said before, 2011 is a transition year and we are confident that the investments we are making will position Wendy’s for 10% to 15% average annual EBITDA growth in 2012 and beyond…”

Despite on of its best days in months, Wendy's stock has not gone anywhere in a long time!

Despite on of its best days in months, Wendy's stock has not gone anywhere in a long time!

Disclosure: author owns WEN

Dean Foods focuses on “efficient pricing mechanisms” to battle rising input costs

Dean Foods (DF) is yet one more company demonstrating confidence in its ability to wield pricing power. DF reported earnings Tuesday that showed weak pricing in milk but a strong focus in raising prices to battle rising input costs (emphasis mine):

“…First, we have stepped up our agenda to reduce costs and improve profitability. Second, because input cost volatility is here to stay, we are focused on pricing to offset inflation through efficient pricing mechanisms. We are working hard to maintain, and where necessary, improve our pricing tools…”

I liked how the earnings announcement avoided direct mention of raising the prices of non-milk products.

The market liked the announcement too. The stock soared 11.5% on the day.

Dean Foods jumps to 10-month highs on a positive reaction to its latest earnigns release

Dean Foods jumps to 10-month highs on a positive reaction to its latest earnigns release

Peet’s Coffee promises not to “overreact” to the rising cost of coffee

Peet’s Cofee (PEET) reported earnings results this evening. The company reaffirmed revenue targets for the year but lowered earnings guidance because of the rising cost of coffee (emphasis mine):

“Reaffirms full-year total net revenue growth in the 8% to 10% range. Lowers full-year diluted earnings per share guidance by $0.10 to the $1.43 to $1.50 range, driven entirely by the significant rise in coffee costs during the last three months

Interestingly enough, PEET implied that the run-up in coffee prices is overdone. This news should provide some reassurance and relief to coffee fans, especially since it seems PEET is resisting the urge to ramp up its own prices to keep up with the rising input costs (emphasis mine):

“While we expect to offset most of the year-over-year coffee cost increase we’re experiencing, we will continue to act in the long-term best interests of our business and not overreact to the recent run-up in world coffee prices.”

PEET has more than doubled in two years

PEET has more than doubled in two years

Pilgrim’s Pride looks to increase prices in the face of soaring input costs

Pilgrim’s Price (PPC) is the second-largest chicken producer in the world. It emerged from bankruptcy at the end of 2009 just as the economy was finally recovering from the recession. Over a year later, the company continues to struggle, especially with soaring costs for feed and energy.

PPC disappointed the market with its first quarter financial performance. The report contained some important information on market prices and industry cost pressures as well as the prospect for higher prices in the future. Key quotes below (emphasis mine):

“Market prices for breast meat averaged $1.26 per pound, down 10% from a year ago, while market prices for wings fell 38%, to $1.00 per pound.”

“Export demand remained very strong during the quarter, with volume rising 90% to an all-time record for the period and sales increasing by a similar amount. The company attributed export gains to the lower value of the dollar as well as chicken’s value proposition versus higher-priced beef and pork in international markets.”

“…the company has recently succeeded in negotiating additional price increases with some of its retail and foodservice customers in response to continued increases in feed costs.”

“Despite now having covered nearly all of our anticipated grain needs through the end of 2011, we are facing at least $500 million in higher feed costs this year. Our customers recognize that the unrelenting upward march of corn and soybean meal is placing extreme pressure on chicken producers and that there must be some sharing of the cost burden in order to ensure a viable business model. To achieve that, we will continue to look at further price increases and will execute structural changes in our book of business with regard to fixed versus market-based pricing…”

Pilgrim's Pride's stock has not fared well since emerging from bankruptcy

Pilgrim's Pride's stock has not fared well since emerging from bankruptcy

Note: PPC declined 9.5% in response to the first quarter’s earnings results.

Panera Bread expecting just modest inflation in second half of 2011

Panera Bread (PNRA) will be raising prices and expects the increases to stick. In narrowing guidance for sales growth from 4.0% to 6.0% to 5.0% to 6.0%, PNRA stated the following:

“This target assumes transaction growth of 2.5% to 3.5% and average check growth of approximately 2.5%. The increased average check growth target is primarily a result of an incremental 1.0% price increase the Company intends to take to offset increased inflation in the latter part of 2011. The incremental price increase and increased inflation are expected to offset each other at the operating margin line and have no impact on the Company’s earnings per diluted share target.”

PNRA is one of the best run operations in the casual dining segment, so it is no surprise they have been able to manage costs and pass along price increases without skipping a beat. The stock has been making fresh all-time highs for almost a year now.

Panera Bread bounced back from the recession quickly and strongly

Panera Bread bounced back from the recession quickly and strongly

Cooper Tire and Rubber races to keep up with rising material costs

Cooper Tire & Rubber Company (CTB) reported its fourth quarter 2010 results last week. CEO Roy Armes noted that raw material costs are skyrocketing although he expects the rate of increase to cool down a bit in the second quarter of this year. CTB has been increasing prices to keep pace with these rising material costs. Another price increase is coming mid-March.

From the earnings report (emphasis mine):

The largest challenge currently facing the Company is the increase in natural rubber prices, which increased more than 75 percent during the last four months. Raw material costs have increased between 15 percent and 20 percent sequentially from the fourth quarter of 2010 to the first quarter of 2011. We expect raw material costs to remain at elevated levels after the first quarter; however, the rate of increase should begin to slow during the second quarter. We continue aggressively taking every action possible to internally offset these cost increases, but it was necessary to announce a price increase in the United States effective March 15, 2011, by a weighted average of 8 to 9 percent with the amount of increases varying by product. This follows a Feb. 1, 2011, price increase of 2.5 percent on nearly all light vehicle products. We have also been steadily increasing prices in other regions where we participate.”

For the foreseeable future, it will clearly cost more to let the rubber hit the road.

AK Steel wastes no time increasing prices again

When AK Steel (AKS) reported earnings for the latest quarter, the company made it clear that it would drive for more pricing power with its customers. True to form, AKS has already announced three separate price hikes in the past in less than three weeks:

February 1
AK Steel Announces March 2011 Surcharges For Electrical And Stainless Steels
AKS announces “…a $430 per ton surcharge will be added to invoices for electrical steel products shipped in March 2011.”

February 10
AK Steel Announces Price Increase For Carbon Steel Products
AKS announces it “…will increase current spot market base prices for all carbon flat-rolled steel products, effective immediately with new orders. Base prices for carbon flat-rolled products will increase by $50 per ton.”

February 18
AK Steel Announces Stainless Steel Price Increase
AKS announces “…it will increase base prices for all 200, 300 and 400 series flat rolled stainless steel products, effective with shipments on February 27, 2011….Base prices of automotive exhaust grades will increase by $.04 per pound. In addition to the base price increases, AK Steel will increase the price for its bright anneal finish extra by $.05 per pound.”

Disclosure: author is long AKS stock

Whirlpool will respond to inflationary pressures with its own price increases

It is almost commonplace now for companies to address inflationary issues in their earnings reports. With its products made of steel, Whirlpool (WHR) is certainly no exception.

In its earnings report this morning, Whirlpool had the following to say about its outlook for inflation, and its impact on the company:

“In 2011, we expect to expand our operating margins despite significant global inflation and generate good levels of free cash flow and further strengthen our financial position…

…Raw material inflation is driving costs higher and we expect to mitigate these costs with improvements in cost productivity, innovation and recently announced price increases.”

Expect to pay more for that kitchen upgrade in the near future…

(Author owns WHR)

Inflation may loom as material costs pressure earnings

In “Business Earnings Climb Despite Rising Costs“, the WSJ reports that companies reporting third quarter results are starting to sing a common refrain: material costs are rising fast and threaten to pressure profits. Soon, these pressures could translate into inflation at the consumer level…just as the Federal Reserve is rolling out a second phase of quantitative easing to fight the exact opposite force of deflation.

The article cites inflationary (or stagflationary) examples from paper and packaging makers, apparel manufacturers, tire companies, and office supply distributors.

Avery Dennison Corporation is experiencing particularly acute problems with higher material costs:

“Label maker Avery Dennison Corp. is battling higher raw material costs with price hikes, but is still losing ground. CFO Mitchell Butier said while the company keeps adding more price increases to fight rising raw materials, it continues ‘to be behind that curve.’ The company announced a ‘mid to high single-digit’ price increase in North America, Chief Executive Dean Scarborough said. ‘Pretty substantial…but we need it. Our margins are really taking a hit,’ he added.”

DuPont benefits from pricing power

E.I. DuPont de Nemours & Co, or DuPont, (DD) reported strong earnings results on Tuesday. DuPont generated $7B in revenue, a 17% year-over-year increase for the third quarter.

DuPont has six business segments. Each one generated year-over-year revenue growth in the third quarter. Four of the six experienced positive pricing power: Electronics & Communications, Performance Chemicals, Performance Coatings, and Performance Materials. Only Safety & Protection experienced downward pricing pressure (hurting net sales gains by 1 percentage point), and Agriculture & Nutrition was (surprisingly) flat.

Pricing power was strong even in the U.S. The U.S. generated 31% of DuPont’s revenues for the quarter, 5 percentage points of the 17% increase in sales came from pricing.

As a result, DuPont is bullish about its outlook and expects its positive pricing power to continue (emphasis mine):

“The company expects full-year earnings to be about $3.10 per share, excluding significant items which will include a fourth quarter $.13 per share loss on the early extinguishment of debt. The previous guidance range was $2.90 to $3.05 per share. The increased outlook reflects strong third quarter results and expectations for sustained demand in key global markets, continued pricing momentum and benefits from ongoing productivity.”

Steel companies squeezed by lower product prices and higher input costs

A common theme has connected the earnings reports of most steel companies: lower prices for many steel products and higher input costs. This margin squeeze has produced poor earnings, and steel companies are providing very cautious outlooks. While pricing for steel products varies – some strong, some weak – the increasing cost pressures are near universal. Inflation is very real for these companies.

Arcelor Mittal (MT), AK Steel (AKS), and U.S. Steel (X) all reported this week. I have included some quotes from their earnings report to provide some examples of the pressures that these companies face.

Arcelor Mittal

“In Q3 the business performed towards the lower end of our expectations against a background of seasonally lower volumes, weakening spot prices and higher costs. Our outlook for Q4 remains cautious as the expected higher input prices continue to work through the business and demand remains muted, though with some regional differences.”

“Sales were lower during the third quarter of 2010 as compared to the second quarter of 2010 due to seasonally lower volumes (-8%), partly offset by higher average steel selling prices (+4%).”

“Sales in the Stainless Steel segment were $1.4 billion for the three months ended September 30, 2010, a decrease of 12% as compared to $1.5 billion for the three months ended June 30, 2010. Sales declined primarily due to lower steel shipments (-8%) as discussed above and lower average steel selling prices (-5%) due to a weak market environment and pressure from imports.”

AK Steel

“The company said its average selling price for the third quarter of 2010 was $1,075 per ton, a 2% decrease from the $1,101 per-ton price in the second quarter of 2010, and approximately 8% higher than the $994 per-ton average price realized in the third quarter of 2009.”

“2010 Iron Ore Price Increase Impacts Third Quarter:
AK Steel said that it has agreed with two of its three primary iron ore suppliers that the requirements for the establishment of the annual benchmark price of iron ore for 2010 have been met. That 2010 benchmark is an increase of 98.65% over the 2009 benchmark, and is higher than the 65% increase the company had previously estimated for the first half and for its third quarter guidance. The third primary supplier of iron ore to the company has not acknowledged yet that an annual benchmark price has been established. Instead, that supplier continues to seek a price increase in excess of the 98.65% annual benchmark price. The company does not agree that this supplier has a right under the parties’ contract to charge based on other than an annual benchmark price and, for purposes of the iron ore purchased from this supplier, the company has used an estimated benchmark price increase of 98.65% in its third quarter financial results.”

“The company’s third quarter 2010 financial results reflect the year-to-date impact of the higher iron ore price, which increased the company’s third quarter operating loss by approximately $76.0 million, or $52 per ton.”

“AK Steel said it expects shipments of approximately 1,300,000 to 1,350,000 tons for the fourth quarter, with an average selling price per ton decrease of approximately 4% from the third quarter. While the company expects fourth-quarter maintenance costs to decrease by about $20 million from the third quarter, it nonetheless expects to incur an operating loss of approximately $80 per ton for the fourth quarter of 2010, largely due to the lower shipments and selling prices combined with continued high iron ore and other raw material costs.”

U.S. Steel

(Quotes transcribed and paraphrased)

“Results declined in 3rd quarter from 2nd from lower flat-rolled average prices, higher raw material costs in flat-rolled segment and European operations: decreased shipments and production volumes, decreased average realized prices, increased costs for facility repair and maintenance (higher activity, not input costs), and consumption of higher cost coal, coke and iron ore purchased to support earlier facility restarts. Decreased spot prices more than compensated for increased contract prices.”

“In 4th quarter, expect lower average realized prices, lower spot and contract.”

“Tubular operations had higher average prices for fifth quarter in a row. Decreased costs for steel substrate. Not expecting same price performance in 4th quarter but costs should continue down.”

Disclosure: author owns X and AKS

Higher raw material costs contribute to AK Steel earnings warning

AK Steel (AKS) reduced its earnings outlook, partially due to higher material costs:

“The company’s revised third quarter outlook primarily reflects costs associated with the acceleration of planned maintenance work at its Ashland (KY) blast furnace, as well as higher raw material and operating costs than were expected at the time of its previous guidance…

…The impact of these changes on the company’s original guidance for the third quarter would result in an operating loss of approximately $20 per ton for the third quarter of 2010. The company’s original guidance was for an operating profit of $15 per ton for the third quarter. Nearly half of the lower expected financial results for the third quarter are attributable to the acceleration of the Ashland blast furnace outage.”

AKS goes on to state that it is expecting that the 2010 global iron ore benchmark price will increase higher than the company’s previous expectations for a 65% year-over-year gain.

Full disclosure: author owns shares in AKS

FedEx Brings Back 401K Matching

Federal Express (FDX) reported strong earnings and raised earnings guidance for the next quarter. Unlike many reports that continue to tout tight controls over hiring and labor costs as a path to profits, FedEx announced it would reinstate the matching component of its 401K program. This announcement is in-line with an earlier report from Hewitt Associates predicting that the majority of companies that dropped 401K matching during the recession would bring these programs back this year.

AKS Steel Expects An Increase In Average Selling Price

AK Steel (AKS) fourth quarter and annual earnings this morning. The outlook for the first quarter includes an expected increase in average selling price of 3-4%. This price hike appears consistent with a recent series of price hikes from AKS (as reported here on Inflation Watch).

AKS returned to profitability in the third quarter of last year and expects to remain profitable in this year’s first quarter despite shipments remaining flat with fourth quarter levels.

Full disclosure: author intends to purchase AKS today

Micron Technology Earnings Benefit from Higher Memory Prices

Perennial money-loser Micron Technology (MU) reported its first quarterly profit in three years. Higher average selling prices on DRAM and NAND flash drove these surprising results:

“Revenue from sales of DRAM products increased 50 percent in the first quarter compared to the fourth quarter due to a 25 percent increase in sales volume and a 21 percent increase in average selling prices. Revenue from sales of NAND Flash products increased 21 percent in the first quarter compared to the fourth quarter due to a 16 percent increase in sales volume and a five percent increase in average selling prices. The company’s gross margin on sales of memory products improved from 12 percent in the fourth quarter of fiscal 2009 to 27 percent in the first quarter of fiscal 2010 due primarily to the increases in average selling prices.”

These results are particularly notable given that memory prices historically follow a persistent downward trajectory (for example, see this chart). While Micron describes market conditions as “improving,” it of course remains to be seen whether the industry can sustain these price hikes (PC World predicts that prices will indeed increase in 2010). If so, such a milestone will speak volumes about inflationary pressures building in the economy.

The stock market responded strongly to these results: MU rose 6% on the news hitting fresh 2-year highs.

Micron Technology Hits Fresh 2-Year Highs On Higher Memory Prices

Micron Technology Hits Fresh 2-Year Highs On Higher Memory Prices

Del Monte beats earnings estimates on higher prices

Add Del Monte to the long list of companies that has been able to grow its earnings by raising its prices:

Del Monte Foods Co., the maker of canned fruit and Meow Mix cat food, raised its profit forecast and posted second-quarter earnings that beat analysts’ estimates after increases in prices and the amount of vegetables sold.