TRG | The Bottom Line – 11/5

Knee deep into Q3’21 earnings season, many companies in TRG’s coverage universe are beating expectations, despite being in challenging times from an inflation/supply/logistics standpoint. A few more salient themes have emerged thus far in our construction & industrial universe, including 1) 2022 set up strong fundamentally across all end markets – New and R&R resi strength continues, non-res builds on its recovery, infrastructure has multiple tailwinds. 2) Going forward, it’s all about execution, including managing logistics, labor and various supply chain challenges. 3) Cost inflation is still persistent, and for the most part (with a few notable categories such as energy costs), companies have been able to offset rising costs through price increases. The real question going into 2022 is whether companies can continue to keep margins in-line with cost inflation. In our opinion, we believe we have an end in sight for managing inflation. Labor and logistics, however, don’t appear to have a generally accepted end game yet.