Moody's on March 19 revised its outlook on the U.S. consumer durables sector to stable from positive as companies struggle to raise prices adequately to offset higher raw material costs.
The agency said it expects profit margins to only slightly increase amid this challenging environment, but noted that home products will remain "a bright spot" among consumer durables.
"We expect companies to modestly increase prices to offset higher costs of raw materials, especially steel and foam, but we are skeptical about consumers acceptance of higher prices, other than for home products," Kevin Cassidy, Moody's vice president and senior credit officer, said in a note.
Moody's forecasts revenue in consumer durables to grow around 2% and operating profit to increase between 3% and 4% over the next 12 months to 18 months. It said operating profit growth should exceed an annualized 4% for its outlook to change to positive.