In It Together: How Company Performance Transmits Through Supply Chains

Supply chains transmit information before markets price it. Customer performance reveals emerging demand, and supplier performance reveals capacity and execution risk. These directional spillovers move through networks in predictable ways. When customers are getting stronger, suppliers see order flow and revenue visibility improve. When suppliers are stable and delivering reliably, customers maintain margins and avoid operational bottlenecks. Both channels matter. When both directions turn positive at the same time, the effect compounds: companies benefit from improving demand and a supply base capable of supporting it.

Key findings in the US market since 2005 are:

• Supply chain spillover is economically meaningful: Upstream momentum (customer demand transmission) and downstream momentum (supplier health transmission) generate statistically significant excess returns of 3.6% and 2.0%, respectively, in the Russell 3000.
• Bidirectional confirmation strengthens the signal: Dual momentum — positive upstream and positive downstream — produced 4.5% annual long-short returns in the Russell 3000 and 6.7% in the Russell 2000, representing 90 bps and 190 bps improvement, respectively, over upstream momentum alone.
• Supply chain spillover front-runs analyst revisions: Companies in the highest spillover tier were 7% more likely to receive upward analyst revisions than those in the lowest tier, indicating the signal captures real forward demand.

Explore the data used to conduct this research:

Visible Alpha Estimates and S&P Capital IQ Estimates

The Visible Alpha Estimates dataset includes forecasts, assumptions and logic from internal sell-side models. This deep consensus data provides a quick understanding of the sell-side view on a company or industry at an unprecedented level of granularity, timeliness and interactivity. Leverage this data to gain a deeper understanding of what is driving a company’s future performance through complete product, segment and industry forecasts. 

The S&P Capital IQ Estimates dataset is the most comprehensive global estimates based on projections, models, analysis and research. This dataset can be used to evaluate earnings estimates to select stocks and manage investment performance and to track the direction and magnitude of upgrades and downgrades and more. 

Business Relationships Analytics (BRA)

The Business Relationships Analytics (BRA) is a comprehensive dataset that captures disclosed business-to-business (B2B) relationships sourced from regulatory filings. It captures partnerships, supplier relationships and customer connections and provides structural visibility into corporate networks and the dynamics that can influence corporate performance and strategy. The dataset is enhanced through a patented process to estimate the economic significance of relationships, when that information is non-disclosed.