• Jeff Matthews

Pattern Recognition

Earnings season is in full swing and here’s what companies from various industries have said: Lancaster Colony (salad dressing, candles, auto supplies):

The company will likely incur higher than previously anticipated costs for freight, natural gas, petroleum wax, synthetic rubber and plastic packaging due to the impact of the recent Gulf Coast hurricanes. The magnitude and duration of this trend remains unclear, although our Glassware and Candles segment will undoubtedly be the most sensitive to these changes. We are striving to implement selected price increases as well as further reduce costs, but these efforts may lag the adverse effect of higher energy-related costs. Grey Wolf, Inc (land-based drilling rigs): We have seen a significant increase in demand for the larger horsepower rigs and correspondingly, the day rates for these rigs have increased. The South Texas market remains strong with continuing increases in day rates and positive mobilization recoveries across all rig classes.

Furniture Brands (furniture, obviously):

The remainder of the decrease in gross margins is related to raw material cost increases…. As you are all aware by now, we, along with the rest of the industry, are facing dramatic cost increases in polyurethane foam…. In the past few weeks we have seen the price of foam increase 25%-30%.

Agco (farm equipment):

You know pricing is up year-over-year really in all our markets. We were in a situation where the whole industry–we’re pricing to offset the higher material costs that we started seeing last year, particularly on the steel. I think that we have been successful in adding price. I think that we have seen some relatively good pricing improvements in all markets. CSX (railroad):

Revenue growth for surface transportation was once again strong, up 9% or $182 million compared to the same period last year. Our pricing, fuel surcharge, and yield management continued to drive revenues, while volumes held steady at near record levels. The team’s focus on productivity also contributed to financial improvement. As a result, our overall operating ratio improved more than four points from last year to an 83% operating ratio this year.

Anybody else see a pattern to all this? Jeff Matthews I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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The content contained in this blog represents only the opinions of Mr. Matthews. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. The content herein is intended solely for the entertainment of the reader, and the author.

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