Member Info for mrtibbles

19 October 2021 Reuters CEY.L

? We retain a Buy recommendation for Centamin, as we believe that
the recent capital markets day provided clarity about the medium-
term production profile. Centamin retains a solid balance sheet and
should produce 450koz-500koz over the longer term with a
sustainable dividend of at least USD100m/year.
? Price target and rating:Price target and rating:Price target and rating:Price target and rating: Our price target, based on 1.2x NAV and
6x EBITDA, is GBp134 (down from GBp137).
? Valuation methodology:Valuation methodology:Valuation methodology:Valuation methodology: We value Centamin on an equally
weighted blend of NPV (10%) and EV/EBITDA methodologies to
generate our GBp134 price target (from GBp137).
Bloomberg CEY LN
Current price Price target
GBp 98 GBp 134 Market cap (GBP m) 1,127
19/10/2021 London Close EV (GBP m) 989
Trading volume 7,350,000
Free float 98.0%
Non-institutional shareholders Share performance

Management: 2% High 52 weeks GBp 164
Low 52 weeks GBp 90
Business description Performance relative to

Centamin is a single-asset gold producer
operating the Sukari mine in Egypt. Sukari
has been in operation since 2009 and has a
20-year mine life from today.

Cont

The main catalyst
for the shares should be the upcoming life of mine plan for Sukari that is
scheduled for 1 December. In our view, the shares remain well supported
by the balance sheet and a high minimum dividend – of USD105m – set for
the year, with a yield of 6.7% for 2021.
19 October 2021
BUY
Current price
Price target
GBp98
GBp 134
19/10/2021 London Close
Market cap (GBP m) 1,127
Reuters CEY.L
Bloomberg CEY LN
Changes made in this note
Rating: Buy (no change)
Price target: GBp 134 (137)
Estimates changes
2021E 2022E 2023E
old ? % old ? % old ? %
Sales 773 -4.8 803 0 748 0
EBITD
A
408 -9.2 404 -0.1 323 -0.2
EPS 0.17 -12.8 0.16 3.4 0.10 -0.3 Source: Berenberg estimates
Share data
Shares outstanding (m) 1,156
Enterprise value (GBP m) 989
Daily trading volume 7,350,000
Source: Thomson Reuters Datastream Y/E 31/12, USD m 2019 2020 2021E 2022E 2023E
Revenues 652 829 736 803 748 EBITDA 293 439 370 404 323
EBIT 167 313 241 281 202
Net income (adjusted) 77 157 169 194 114
EPS (reported) 0.08 0.14 0.15 0.17 0.10
EPS (adjusted)EPS (adjusted)EPS (adjusted)EPS (adjusted) 0.070.070.070.07 0.140.140.140.14 0.150.150.150.15 0.170.170.170.17 0.100.100.100.10
DPS 0.04 0.09 0.09 0.06 0.04
Dividend payout ratio 61% 66% 62% 36% 43%
Dividend yield 2.7% 5.6% 6.7% 4.4% 3.1%
Capex -93 -139 -229 -204 -181
Free cash flow 156 314 79 193 159
FCF yield 4.3% 8.1% 1.2% 6.7% 4.5%
Y/E net debt (net cash) -278 -291 -231 -255 -264
Net debt / EBITDA -0.95 -0.66 -0.62 -0.63 -0.82
Gross margin 30.2% 40.0% 35.1% 36.6% 28.7%
EBITDA margin 44.9% 52.9% 50.3% 50.3% 43.2%
EBIT margin 25.6% 37.8% 32.8% 35.1% 27.0%
ROCE 12.8% 23.7% 16.9% 18.3% 12.7%
P/E 22.7 11.8 9.4 8.2 13.9
EV/EBITDA 5.1 3.6 3.7 3.4 4.

Cont

Berenberg
Q3 an incremental miss; guidance maintained

? Q3 light on lower throughput: Centamin has announced Q3 production of
103.5koz from the Sukari mine in Egypt, versus our expectation of 109koz
and consensus of 107koz. A total of 2.9Mt was mined from the open pit at
an average grade of 1.02g/t, while the company mined 201kt from the
underground mine at 4.47g/t. Grade from the open pit was above our
expectation, with higher grades drawn from the Stage 4 West area. The
waste-stripping programme is also progressing well, with both the owner-
operated and Capital-operated programmes 17% ahead of schedule. The
good performance of the open pit was offset by lower grade and volumes
from the underground mine being below our expectations. This appears to
be at least partly down to contractor underperformance, with a tendering
process for a new contractor underway. Production was incrementally
light due to lower processed tonnes – at 2.885Mt versus our expectation of
3Mt, with lower plant throughput driven by maintenance during the
period, including a mill reline. Recoveries at 88.7% were in line with our
expectation. All in sustaining costs (AISC) were USD1,266/oz (Berenberg:
USD1,1875/oz/; consensus: USD1,218/oz) and revenue for the period was
USD183m (Berenberg and consensus: USD194m).
? Trimming production expectation: We have trimmed our 2021 production
expectation – from 429koz at an AISC of USD1,183/oz, to 413koz at an AISC
of USD1,229/oz. This compares to guidance – which has been maintained
– of 400koz-430koz at an AISC of USD1,150/oz-USD1,250/oz, with
management now flagging the midpoint of the range as the likely landing
point. Capex guidance has also been maintained at USD225m, with ytd
expenditure of USD67.6m. Centamin maintains a solid balance sheet, with
no debt and USD256.1m of cash – although FCF generation remains muted
at present due to the high amount of waste being mined as part of the
catch-up stripping programme.
? Maintain a Buy, cutting price target: We maintain a Buy recommendation,
but our price target pulls back from GBp138/share to GBp134/share based
on unchanged multiples of 1.2x NAV an 6x EV/EBITDA.

Cont

Increase in cash and cash equivalents 7 (91) (70) (35)
(Increase) / decrease in borrowings 0 0 0 (70)
Repayment of finance leases 0 0 0 0
Exchange / other 0 0 0 0
(Increase) / decrease in net debt 0 0 0 0
Net cash / (debt) (start) 0 0 0 0
Net cash / (debt) (end) 291 201 132 27
Leases 0 0 0 0
Net cash / (debt) (end) including leases 291 201 132 27Centamin
19 October 2021
5
Figure 4: Balance sheet ($m)
December year-end 2020A 2021E 2022E 2023E
Goodwill 0 0 0 0
Other intangible assets 64 46 56 66
PPE 830 904 946 1,039
Trade and other LT receivables 0 0 0 0
Deferred tax asset 0 0 0 0
Investments in JVs / Associates 0 0 0 0
Retirement benefit asset 0 0 0 0
Other non-current assets 65 91 94 116
Fixed assets 959 1,041 1,096 1,221
Inventories 119 116 124 131
Trade and other receivables 18 26 27 29
Cash & cash equivalents 291 201 132 97
Financial assets 0 0 0 0
Other current assets 9 9 9 9
Current assets 437 352 292 265
Total Assets 1,396 1,393 1,388 1,486
Trade payables 64 65 65 67
Borrowings 0 0 0 70
Tax liabilities 0 0 0 0
Provisions 7 7 7 7
Other current liabilities 0 0 0 0
Current liabilities 72 72 72 144
Total assets less current liabilities 1,324 1,321 1,316 1,343
Net current assets 365 280 220 122
Long-term borrowings and finance leases 0 0 0 0
Retirement benefit obligations 0 0 0 0
Provisions 0 0 0 0
Other payables 0 0 0 0
Other non-current liabilities 33 30 30 30
Non-current liabilities 34 30 30 30
Net Assets 1,289 1,290 1,285 1,312
Total equity 1,289 1,329 1,324 1,350
Minority interests 17 8 8 8
Shareholders’ equity 1,307 1,336 1,331 1,358

Number of shares at period end (basic) (m) 1,153 1,156 1,156 1,156
Reported EPS (basic) ($) 0 0 0 0
Reported EPS (diluted) ($) 0 0 0 0
Underlying EPS (basic) ($) 0 0 0 0
Underlying EPS (basic) growth (%) 79 (30) (36) (4)
Underlying EPS (diluted) ($) 0 0 0 0
Underlying EPS (diluted) growth (%) 79 (30) (36) (4)
Pro-forma EPS (diluted) ($) 0 0 0 0
DPS (Ordinary) ($) 0 0 0 0
DPS (Total) ($) 0 0 0 0
Dividend growth (%) 20 (24) (64) 13
Dividend cover (x) 1 1 2 2

Source: Liberum

Figure 3: Cash flow statement ($m)
December year-end 2020A 2021E 2022E 2023E
Reported EBIT 307 209 153 149
Profit in associates 0 0 0 0
Depreciation (124) (141) (162) (183)
Amortisation 0 0 0 0
Loss / (profit) on sale of PPE 0 0 0 0
Share based payments 0 0 0 0
Increase/(Decrease) in provisions 0 0 0 0
Loss / (Gain) on business disposal 0 0 0 0
Other 0 0 0 0
Operating cash flows before movements in working capital 451 346 315 332
(Increase) / decrease in inventories (21) (23) (12) (28)
(Increase) / decrease in receivables 16 (7) (2) (1)
(Decrease) / increase in payables 7 0 0 2
(Increase) / decrease in working capital 2 (30) (13) (27)
Cash generated by operations 371 322 302 304
Tax paid (0) 0 0 0
Net cash flow from operating activities 453 315 302 304
Purchase of PPE (127) (157) (111) (196)
Purchase of other intangibles (12) (17) (10) (10)
Disposals 0 0 0 0
Net capex (139) (174) (121) (206)
Dividends from associates 0 0 0 0
Movement in short term investments 0 0 0 0
Acquisitions 7 0 0 0
(Investments) / disposals of associates 0 0 0 0
Other cash flow from investing 0 0 0 0
Net cash flow from investing activities (130) (232) (212) (286)
Net interest received / (paid) 8 3 2 1
Equity dividends paid (139) (81) (76) (41)
Share issues / (repurchases) 0 0 0 0
Lease payments 0 0 0 0
Increase / (decrease) in borrowings 0 0 0 70
Other cash flow from financing (174) (93) (84) (82)
Net cash flow from financing activities (316) (174) (160) (53)

Cont-

Calendar year
EV (CY) 20A 21E 22E 23E
Market Cap 1,591 1,591 1,591 1,591
Net Debt/(Cash) (291.3) (201.5) (131.6) (27.3)
Pension & other adj. (159.0) (102.9) (84.3) (81.9)
EV 1,140 1,286 1,375 1,481

Valuation (CY) 20A 21E 22E 23E
P/E (x) 10.1 14.5 22.5 23.4
Div Yield (%) 8.7 6.6 2.4 2.7
EV/Sales (x) 1.4 1.8 1.9 1.9
EV/EBITDA (x) 2.6 3.6 4.4 4.5
EV/EBIT (x) 3.7 6.1 9.0 10.0
FCFe Yield (%) 20.5 10.0 12.0 6.8
Price / book (x) 1.2 1.2 1.2 1.2

Financial year (December year end)
Financials (FY) 20A 21E 22E 23E
Sales 829 732 736 764
EBITDA 439 353 315 332
EBIT 307 209 153 149
EBIT Margin (%) 37.1 28.6 20.8 19.4
Net Interest 8.5 3.3 1.7 1.3
PBT 316 213 155 150
FD EPS ($) 0.1 0.1 0.1 0.1
- vs consensus (%) 0.4 0.0 0.0 0.0
DPS ($) 0.1 0.1 0.0 0.0

Leverage (FY) 20A 21E 22E 23E
Net Debt/(Cash) (291.3) (201.5) (131.6) (27.3)
Net Debt/EBITDA (x) (0.7) (0.6) (0.4) (0.1)
Net Debt/Mkt Cap (x) (0.2) (0.1) (0.1) (0.0)
Source: Liberum, Bloomberg
All numbers are on a post-IFRS 16 b

Financial model
Figure 2: Income statement ($m)
December year-end 2020A 2021E 2022E 2023E
Total sales 829 732 736 764
Sales growth (%) 27 (12) 0 4
Gross margin (%) 46 35 28 27
Cost of sales (449) (477) (528) (561)
Gross profit 379 255 207 204
Operating expenses (55) (38) (36) (36)
Administrative expenses 0 0 0 0
Share based payments 0 0 0 0
Underlying EBITDA 439 353 315 332
Depreciation (124) (141) (162) (183)
Amortisation (not acquired) 0 0 0 0
Underlying EBIT (pre JVs) 307 209 153 149
EBIT (pre JVs) margin (%) 37 29 21 19
Revenue 0 0 0 0
PBT 0 0 0 0
Tax 0 0 0 0
JV post tax profit 0 0 0 0
JV contribution 0 0 0 0
Profit on disposal 0 0 0 0
Underlying EBIT 307 209 153 149
EBIT Margin (%) 37 29 21 19
Amortisation of acquired intangibles 0 0 0 0
Exceptional / extraordinary costs (1) 0 0 0
Reported EBIT 307 209 153 149
Non-operating exceptional costs 0 0 0 0
Interest income 2 1 2 1
Interest costs 7 2 0 0
Pension credit / (cost) 0 0 0 0
Net Interest 8 3 2 1
Underlying PBT 316 213 155 150
Reported PBT 316 213 155 150
Underlying tax rate (%) 0 (0) 0 0
Exceptional tax rate (%) 0 0 0 0
Reported tax rate (%) 0 (0) 0 0
Underlying tax (0) 0 0 0
Exceptional tax 0 0 0 0
Reported tax (0) 0 0 0
Underlying PAT 315 213 155 150
Discontinued operations (net) 0 0 0 0
Profit on disposal 0 0 0 0
Reported PAT 315 213 155 150
Share of profit attributable to minorities (159) (103) (84) (82)
Preference dividends 0 0 0 0
Minorities (159) (103) (84) (82)
Underlying net income 157 110 71 68
Reported net income 156 110 71 68
Weighted average number of shares (basic) (m) 1,153 1,156 1,156 1,156
Weighted average number of shares (diluted) (m) 1,153 1,156 1,156 1,156
cont-

Liberium
This document is a marketing communication and has been prepared and distributed by Liberum Capital Limited. It is not independent research prepared in accordance
with legal requirements designed to promote the independence of investment research and is not subject to a prohibition on dealing ahead of the dissemination of
investment research. For Reg-AC certification, see the end of the text. Liberum does and seeks to do business with companies covered in this communication. As a
result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision. 9m’21 production was 307.8koz at cash costs of
US$820/oz and All-In Sustaining Costs (AISC) of
US$1,197/oz. Centamin is therefore now aiming to achieve
the mid-point of its full-year 2021 target of 400-430koz, and
the lower half of the cash cost and AISC ranges of US$800-
900/oz and US$1,150-1,250/oz, respectively. We see this
as an important ‘result’ in that Centamin has been investing
heavily for operational reliability in order to restore market
confidence in the company’s ability to meet guidance.
FY21: production likely in-line, costs better than we hoped
Our existing forecast for FY21 production is 413koz, at cash cost of
US$833/oz and AISC of US$1,212/oz. Centamin’s achieving the mid-point of
its production guidance range would therefore put it in-line with our
production number. It is looking likely to us, however, that Centamin will
better our costs expectations.
Balance sheet remains strong
As at 30 September 2021, Centamin had US$256m of cash and liquid assets
(June 2021: US$312m), after the interim dividend of US$46.1m, with no debt
and no hedging.
Phase 2 of Sukari Life of Asset (LOA) review on 1st Dec
The long- and eagerly-awaited Phase 2 of the Sukari LOA review is to be
unveiled on Wednesday 1 December 2021. Updated reserve and resource
statements for Sukari will also be published at the time.

Cont-

If you ever feel useless, just remember USA took 4 Presidents, thousands of lives, trillions of dollars and 20 years to replace Taliban with Taliban.

Anubhav Sinha
@anubhavsinha

Absolutely Paul!
Nails on the head, nails on the head!

Thank you Mr Gnome, for some great posts and info,as usual!

Very fair and valid Summing up Somnamna!
Been frustrating at times to say the least for us trusting share holders !

Most long term holders will agree that Martin Horgan has achieved great deal in a relatively short time , although admittedly it may not be fast enough for some relatively new holders who prefer to be in and out of stocks more quickly.
Possibly some of the detail Decembers announcement may not please everyone, that is to be expected , although it may exceed expectations, who really knows at this stage , however I remain very optimistic for the future.

https://www.asktraders.com/analysis/centamin-shares-are-falling-despite-q3-results/
The article just repeats what we already know that the POG affects Centamins profits , I am certain that we aware all aware of that by now, so pretty pointless,
How much does the author know about the engineering and geological issues involved in running successful gold mine?
What do they know about doing business in Egypt or the legal system in Eygpt
Have they ever visited Sukari?
What gold mining experience does the author have, most probably very little or none at all , they apply the same analytical methods to pub chain's, super,markers or jelly bean production.
This outfit is just about getting people hooked on trading, even worse it promotes CFD trading on which it is estimated that between 71% - 80% 0f retail investors lose money on.
Centamin/Sukari is where it is simply because appropriate mining methods and practice were abandoned in favour of high grading in order to impress the market with impressive guidance in the short term, Robbing Peter to Pay Paul, although as we are now aware this glossing over was unsustainable and it's now time to "Pay the Ferryman!"
The process which Sukari is going through now is the only waty to access higher grades safely and safeguard future production which may or may not exceed the exaggerated claims of the previous management but the guidance will be more constant and reliable and the AISC should be brought bacjk far more rspectable levels or even to industry syandard lows.

This article is pointless and illustrates the lack of understanding that some journalists have about Sukari and Centamin.
If this journalist had taken the trouble to do some research they would realise the reasons why the share price is where it is at present and that the Sukari operations are performing exactly to Martin Horgan's recovery plan, in fact things are ahead schedule!
I appreciate that some more recent holders are frustrated with lack of upward movement of the share price, but this is to be expected due to the increased AISC whilst the open pit remedial work takes place.
It's quite simple really there is no quick or magical fix to the open pit, the work has to be carried out properly to minimise any risk to the work force and mitigate future production risk, this has been fully explained by Martin Horgan in the two previous presentations and quarterly reports for anyone who has taken the trouble to listen to the presentations or taken the trouble to read the reports
So those hoping for a sudden upsurge in share price certainly before the remedial works are completed are most likely to remain frustrated for a while longer and so may possibly want to consider other alternative investments that may be more suited to their more usual/preferred trading/investment strategy.
Over the past decade have been many traders that have popped in hoping to be able to predict the Centamin share price and make whatever percent by using their usual trading charts and methodology, most have been disappointed/disillusioned and then moved onto other stocks and forums.
As some of our mining professionals have explained over the years mining is notoriously unpredictable and in addition Centamin has always been a contrarian investment in a contrarian country which amplifies the unpredictability!
I remain very optimistic that the next report won't disappoint but confirm that the turnaround is indeed progressing as predicted, possibly even ahead of schedule and there may even be some news on other developments in Eygpt and elsewhere that will reassure share holders and the market.
I don't see any threat to the present dividend policy,quite the contrary.
If Basel 3 was'nt going to have a positive effect on the POG then central banks wouldn't be accumulating so much gold under the radar on the wholesale markets and their trading rooms wouldn't be desperately trying to unwind Comex positions.
https://www.youtube.com/watch?v=WSMiH2k8MNc&list=PLE1y8hGSqr8ar1gKUdfqFDK5ygLIlrdmz&index=1
Is the Covid crisis over, no certainly not iin many countries and it's getting worse in the UK where restrictions may have to be reintroduced according to SAGE,
https://www.bbc.co.uk/news/health-59011321
Are the UK/USA economies improving, not apparent for or the ordinary people.
https://www.bbc.co.uk/news/business-58998860

To celebrate 50 episodes of demystifying the precious metals markets, Andrew Maguire takes the LFV audience for a sneak peek at the 20 tonnes of .9999 silver sitting in Kinesis’ new Liechtenstein vault.
In more silver news, the life-long wholesaler shares word of new, unprecedented demand entering the physical silver market, with the impact on the paper-driven price yet to be felt.
In the aftermath of last Friday’s Consumer Price Index (CPI) shock, the precious metals expert reevaluates gold and silver, and exposes the technical trickery behind gold’s sudden $30 drop.

https://www.youtube.com/watch?v=WSMiH2k8MNc

The opinions expressed in this video of Andrew Maguire and any guest, do not purport to reflect the official policy or position of Kinesis.

Thurs 21 Oct 2021
By Svea Herbst-Bayliss

(Reuters) - Hedge funds that invested in the blank-check acquisition company that made a $875 million deal to merge with former U.S. President Donald Trump's new social media venture are set to make five times their investment, regulatory filings show.
It is the biggest gain investors in so-called special purpose acquisition companies (SPACs) have ever recorded on the first day after a deal was announced, according to SPAC Research.
Nearly a dozen hedge funds invested in the SPAC, Digital World Acquisition Corp, in its initial public offering (IPO) in September, according to the filings. Like other SPACs, Digital World did not disclose which company it was seeking to buy.
Hedge funds have pumped hundreds of billions of dollars into these types of vehicles in the past two years.
The investor excitement had fizzled in the past few months as some companies that merged with SPACs failed to deliver on their bullish projections and retail investors nursed losses. Stock market reaction has been so poor to recent deals that some hedge funds only make pennies on the dollar by buying into the IPOs of SPACs and then selling their shares in the stock market or redeeming them for their IPO price.
https://uk.finance.yahoo.com/news/hedge-funds-score-unprecedented-gains-201812189.html

I don't know if a chap down the local has this right but he is a big fan of bitcoin, crypto and reckons that some of the bigger online UK supermarkets are looking at ways to allow crypto/bitccoin to be used for their weekly/monthly orders.
I cant understand how this would work as cryto/bitcoin value jumps about all over the place so you could end up paying a lot more or less for the weekly/monthly shop, he didn't really explain that though?

Wall Street Breakfast today-
Some predicted the move since he left office, but former President Donald Trump is finally launching his own media network. The new business, called Trump Media & Technology Group (TMTG), will include a social media platform called "TRUTH Social," as well as a subscription video-on-demand service (TMTG+) that features "non-woke" entertainment programming, news and podcasts. The company will go public via a SPAC merger with Miami-based Digital World Acquisition (NASDAQ:DWAC), which surged more than 50% premarket to $15/share.

Quote: "I created TRUTH Social and TMTG to stand up to the tyranny of Big Tech," Trump wrote in a press release. "We live in a world where the Taliban has a huge presence on Twitter, yet your favorite American President has been silenced. This is unacceptable. Trump Media & Technology Group's mission is to create a rival to the liberal media consortium and fight back against the 'Big Tech' companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America."

Earlier this year, Trump was restricted, and then banned, by major social media giants like Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), Snapchat (NYSE:SNAP) and YouTube (GOOG, GOOGL) after the Jan. 6 storming of the U.S. Capitol. Following the incident, Parler - a free speech social network popular with conservatives - was also removed from the Apple and Google app stores, while Amazon (NASDAQ:AMZN) ended its web hosting agreement. As a result, TMTG appears to be targeting multiple fronts, saying on its website that it eventually hopes to compete against AWS and Google Cloud, as well as Disney (NYSE:DIS) and Netflix (NASDAQ:NFLX).

Along ideological lines? While "TRUTH Social" intends to be America's "big tent" social media company that encourages "free speech," we could be witnessing a further polarization of the corporate landscape. Once upon a time, politics was not married to the business world as it is today, and competing services may continue to sprout up as the country appears more divided. According to a survey from The Hill, 30% of respondents said they'd use a "Trump-backed social media platform," though 54% said they wouldn't and 16% would consider it. TRUTH Social is set for a beta launch next month and a full rollout in the first quarter of 2022

Hi Mr Gnome & Mr Bond
I am sure you will recall Dave Mc from Capital used to post on here about how he often came across these illegal artisanal mining camps and how the Egyptian army would keep chasing them off?
https://www.youtube.com/watch?v=KPS7ShcTxDw
https://www.reuters.com/article/us-gold-mining-artisanal-explainer-idUSKBN1ZE0YU

Seeking Alpha Mon 11 Oct
Investors will be keeping a close eye on rising costs as the Q3 earnings season kicks off this week. Price pressures could pose a problem for corporate profits in the current quarter and beyond, with the S&P 500 already down 3.2% from its September record. Supply chain bottlenecks, labor problems and outsized demand are all leading to shortages, while a jump in raw material costs is pressuring companies' bottom lines.

Red flags: Last month, FedEx (FDX) dropped 9.1% after reporting soft earnings and cutting its financial outlook due to a challenging labor market. Nike (NKE) also slid 6.3% on lower-than-expected revenue from lost production in Vietnam, while Bed Bath & Beyond (BBBY) plunged 22% after citing inflation for a sharp decline in quarterly sales. Ballooning costs could spread to the banking sector, with JPMorgan (JPM) kicking off Q3 earnings on Wednesday. Lenders may be squeezed by rising pay and hefty spending on technology to compete with fintech challengers.

Analysts expect that earnings from S&P 500 companies grew 29.6% in the third quarter from a year earlier, when businesses were working to recover from the effects of the pandemic. But that's down from 96.3% growth in Q2, according to IBES data from Refinitiv, which also sees net profit margins declining from the previous quarter.

Commentary: Costs have emerged as "a great wild card for the quarter and for the outlook" of the industry, said John McDonald, senior analyst for large-cap banks at Autonomous Research. "If they're having to pay more and they're unable to pass it on to end purchasers or consumers and it's hitting profitability, that's something that will be concerning," added Holly MacDonald, chief investment officer at Bessemer Trust. Companies have already attempted several techniques to clamp down on costs, such as cutting back on customer services and conveniences, or shrinkflation, where product sizes are slimmed down but prices are kept the same.