Pricing Power Executive Summary: Q3 2026
Aggregate Pricing Trend:
Pricing power across the S&P 500 is broadly fragmented, with a general trend toward stabilization compared to the prior quarter. While several sectors continue to implement moderate price increases, the cadence of these adjustments is becoming less uniform. Reports suggest that firms are shifting away from broad-based hikes toward targeted, strategic adjustments, indicating a transition from systemic pricing power to segment-specific leverage.
Strongest Sectors:
The strongest pricing durability is observed in Financials (specifically market infrastructure), Industrials (logistics and aerospace), and Materials. These sectors are leveraging high barriers to entry, inelastic demand for essential logistics, and contractual or regulatory mechanisms to implement robust price realizations.
Weakest Sectors:
Pricing power is most constrained in Consumer Discretionary and Energy (specifically U.S. natural gas), where firms are facing price compression. These sectors are primarily driven by softening consumer demand and commodity-specific supply gluts, forcing a strategic shift toward discounting or a reduction in net yields to maintain volume.
Inflation Signal:
Aggregate corporate behavior suggests a decelerating trajectory for producer and consumer prices. Contacts noted a transition toward "stable" or "modest" pricing in Information Technology and Utilities, while several firms indicated that current price increases are primarily intended to offset existing costs rather than expand margins. These reports suggest that the window for aggressive cost pass-through is narrowing, which may signal a cooling of inflationary pressures in the medium term.
Pricing activity across the consumer discretionary sector remains fragmented. Some firms are implementing robust price increases, notably Ralph Lauren, which reported mid-teens growth in average unit retail driven by a reduction in discount rates. Airbnb continues to see moderate price appreciation, with average daily rates increasing 4% year-over-year and a shift toward dynamic pricing tools. Conversely, pricing power is softening in other segments; Norwegian Cruise Line Holdings expects a moderate decline in net yields, while Williams-Sonoma reports softening merchandise margins.
The ability to pass through input costs varies by sub-sector. Ralph Lauren has successfully offset increased U.S. tariffs and non-cotton costs through robust pricing and lower cotton commodity costs. In the cruise industry, Royal Caribbean is leveraging record pricing to manage higher-than-anticipated fuel costs, though Norwegian Cruise Line Holdings is struggling to offset rising fuel expenses despite achieving meaningful internal cost efficiencies. TJX has relied on fuel and inventory hedges to mitigate short-term costs, though it anticipates future fuel headwinds will be unfavorable.
Ralph Lauren and Royal Caribbean emerge as leaders, demonstrating robust pricing power rooted in brand strength and high demand for key products. Airbnb maintains a moderate lead by utilizing technology to align pricing with seasonality. Laggards include Norwegian Cruise Line Holdings and Williams-Sonoma, both of which are conceding price or experiencing margin erosion. Nike also shows a lack of organic pricing power, as its recent margin gains were driven by one-time regulatory tariff relief rather than price increases.
The outlook for operating margins is mixed. Margins are expanding for Ralph Lauren due to increased full-price selling and Airbnb via sustained rate growth. However, margins are compressing or unstable for others. Williams-Sonoma faces margin pressure from incremental tariff costs and elevated oil prices. Norwegian Cruise Line Holdings expects declining yields to weigh on performance, and TJX anticipates that the expiration of hedges and higher fuel costs will create a moderate drag on pretax profit margins.
Pricing actions across the consumer staples sector remain modest to moderate. Firms are generally maintaining or slightly increasing prices, though the cadence varies by channel. Campbell Soup Company and PepsiCo report moderate pricing gains, with the former seeing a total price/mix increase of 1.9%. Hormel Foods has implemented market-based pricing actions, particularly within its foodservice segment. However, pricing is not uniform; PepsiCo notes softening in North American convenient foods, where effective net pricing has declined, and Kroger is actively pursuing strategic price reductions to maintain competitiveness.
The ability to pass through input costs is uneven. Campbell Soup Company reports that productivity and pricing gains were more than offset by persistent cost of goods sold inflation, which is expected to remain elevated. Similarly, Hormel Foods and Dollar General report that pricing gains are being partially offset by inflationary pressures in logistics, transportation, and fuel. In contrast, ADM is offsetting external risks—such as energy costs and trade volatility—through risk management and a strategic shift toward higher-margin product lines.
PepsiCo and Campbell Soup Company demonstrate moderate pricing power, leveraging brand strength to implement net pricing increases. Dollar General has also shown resilience, utilizing higher inventory markups to expand gross profit margins. Conversely, Kroger acts as a laggard in pricing power, conceding price through "planned price investments" and facing margin pressure from egg deflation. This divergence suggests that while branded manufacturers maintain some leverage due to demand inelasticity, large-scale retailers are facing stronger competitive pressure to lower prices for the end consumer.
The margin outlook is mixed, leaning toward stability with pockets of modest expansion. ADM and Hormel Foods report expanding margins driven by cost optimization and market-based pricing. Dollar General also sees gross margin expansion via markups. However, these gains are fragile; Campbell Soup Company signals potential margin compression as COGS inflation remains a persistent headwind. Overall, while some firms are successfully leveraging price/mix to protect the bottom line, the broader sector remains sensitive to volatile transportation and logistics costs.
Pricing trends across the energy sector are divergent, characterized by a sharp contrast between commodity types. International oil pricing remains robust, providing a strong tailwind for integrated producers. Conversely, pricing for U.S. natural gas is softening significantly, with realized prices trending downward. For midstream operators, pricing cadence varies; some are realizing retroactive rate increases following legal decisions, while others are experiencing a moderate decline in average fee rates across the Gulf Coast and Permian regions.
Firms are employing a mix of contractual protections and internal efficiencies to manage input costs. KMI is successfully passing costs through via long-term, "take-or-pay" fee-based contracts, which insulate margins from short-term volatility. CVX is not relying solely on pass-throughs but is aggressively offsetting inflationary pressures through structural cost-cutting, targeting significant annual run-rate savings. Meanwhile, OKE is seeing modest relief in operating costs due to regulatory changes regarding methane fees, reducing the need for further price hikes in specific segments.
CVX and KMI demonstrate robust pricing power. CVX leverages higher global commodity prices and strong margins on refined product sales, while KMI benefits from demand inelasticity and sole-source characteristics inherent in its long-term fee structures and ancillary terminal fees. In contrast, OKE is acting as a laggard in the gathering and processing space, where it has been forced to concede to lower realized prices for NGLs and natural gas. This suggests a lack of pricing leverage in the natural gas segment compared to the robust positioning of integrated oil majors.
The outlook for operating margins is mixed but leans toward stability for diversified players. Margins for CVX are expanding, supported by refined product strength and internal cost discipline. KMI maintains stable to expanding margins due to the recovery of retroactive rate increases and lower power costs in CO2 operations. However, OKE is facing margin compression in its Gathering and Processing segment, driven by the softening of natural gas and NGL pricing. Overall, the sector's margin trajectory depends heavily on the balance between robust international oil prices and the softening domestic gas market.
Pricing actions across the financial sector are mixed, with a divergence between specialized exchange services and consumer-facing insurance. Market infrastructure firms are implementing robust, frequent increases; Cboe reported a 21 percent increase in multi-listed options revenue per contract and a 31 percent rise in market data fees. Similarly, CME saw a 20 percent increase in market data revenue. In the insurance sector, pricing is bifurcated: homeowners insurance premiums rose 6.8% due to replacement costs, while the auto segment is seeing a strategic shift toward lower average premiums on new policies to improve affordability and capture market share.
Firms are largely absorbing variable costs or offsetting them through productivity gains rather than direct pass-through. American Express noted higher variable customer engagement costs linked to card refreshes and benefit usage, which were absorbed alongside strong fee growth. CME is currently managing variable costs associated with its transition to Google Cloud. In contrast, AMP achieved higher productivity, with revenue per advisor increasing 12% despite stable underlying fee rates, suggesting efficiency gains are offsetting operational costs.
Cboe and Visa emerge as leaders with robust pricing power, driven by demand inelasticity for critical market infrastructure and dominant network effects, respectively. Cboe’s ability to significantly raise access and capacity fees suggests a strong competitive moat. American Express also demonstrates moderate power through strong card fee growth. Conversely, firms in the auto insurance segment are acting as laggards in pricing, conceding margins by offering more affordable premiums to remain competitive in a price-sensitive consumer environment.
The margin outlook is generally expanding or stable, though the drivers vary by sub-sector. Operating margins for exchange operators like Cboe and CME are expanding due to robust fee increases. For wealth and brokerage firms, margins remain stable or are improving through operating leverage; WTW specifically attributed margin expansion to expense discipline and improved leverage. However, the outlook for insurance margins is more nuanced, as the gains in homeowners insurance are being partially offset by the strategic decision to lower premiums in the auto segment.
Pricing activity across the health care sector is mixed, with a divergence between specialized therapeutics and broad-market medical devices. Several firms, including VRTX, ISRG, and IDXX, report moderate to robust increases in average selling prices or net price realization. In the insurance sector, CI is implementing premium rate increases to align with rising medical costs. Conversely, pricing is stable for EW, while others face downward pressure. AMGN and PFE report mixed results, with specific product gains offset by price erosion driven by generic entry and regulatory headwinds, most notably the impact of the Inflation Reduction Act on AMGN’s Enbrel.
The ability to pass through input costs varies by sub-sector. GEHC is exercising moderate pricing power to offset significant increases in memory chips, oil, and freight, expecting to mitigate over half of these headwinds through price adjustments. CI is actively passing expected medical cost increases to customers via premium hikes. However, some firms are absorbing costs or relying on efficiencies. BAX reports persistent negative impacts from tariffs and manufacturing costs without evidence of offsetting price hikes. Similarly, MRNA and LH are leveraging operational efficiencies and AI-driven robotics rather than price increases to manage their cost bases.
IDXX and VRTX emerge as leaders in pricing power, leveraging strong net price realization and demand inelasticity for specialized treatments. ISRG also demonstrates strength through higher average selling prices for its systems. In contrast, laggards include AMGN and PFE, both of which are conceding price due to regulatory price-setting mechanisms and the entry of generic competitors. EW remains a neutral actor, maintaining stable pricing globally despite facing slight margin compression from a weakening dollar.
The margin outlook is fragmented. IDXX and A are seeing margin expansion driven by price realization and operational execution. LH and VTRS report stable to improving leverage through technology investments and operating efficiencies. However, margins are compressing or facing risks for others; EW reports a slight compression due to manufacturing expenses, and ISRG anticipates a modest drag on gross margins from future tariffs. GEHC's outlook remains tempered by persistent inflationary pressures on components and logistics.
The Industrials sector is characterized by a general trend of price increases, though the cadence and magnitude vary by sub-sector. Logistics and aerospace firms are implementing robust price adjustments; UPS reports significant increases in revenue per piece across domestic and international segments, while FedEx notes higher package yields. In the diversified industrials and aviation space, companies such as Textron and Allegion are utilizing price realization to offset volume declines or inflationary pressures. Pricing actions appear to be a consistent strategic focus, with firms like Rollins emphasizing a "culture of continuous improvement" regarding pricing to support margin profiles.
Firms are actively attempting to pass through input cost increases, though the success of these efforts is mixed. Brown & Root has successfully passed through postage rate increases to customers, and CSX has utilized fuel surcharges to mitigate energy volatility. Similarly, Textron has recovered previously imposed tariffs through higher pricing. However, some firms are absorbing costs or relying on internal efficiencies. Boeing’s Global Services segment reported margin compression due to higher costs, and RTX has relied on "improved net productivity" to offset the impact of higher tariffs and operational costs.
Strong pricing power is most evident in the logistics and specialized equipment sectors. UPS and FedEx are leaders, leveraging demand inelasticity and yield management to drive robust revenue growth. GE Vernova and JCI also demonstrate strong power, utilizing favorable pricing and productivity to expand margins. Conversely, laggards include those facing competitive or structural headwinds; Otis reports "unfavorable price" impacts in its New Equipment segment, and JB Hunt is seeing softening pricing in its Intermodal segment, where revenue per load has declined.
The margin outlook for the sector is generally stable to expanding, though it remains sensitive to persistent inflationary headwinds. AME and GE Vernova report robust margin expansion driven by disciplined operating performance and pricing. JCI and RTX are also seeing expansion through a combination of favorable pricing and productivity gains. However, some compression persists where input costs outpace price realization, as seen in Boeing’s services segment and the moderate pressure on Allegion’s margins due to inflation. Overall, the ability of firms to maintain "positive price cost" dynamics suggests a stable outlook for most large-scale industrial operators.
The pricing environment across the Information Technology sector remains generally stable, with most firms maintaining current price levels. However, evidence of targeted, scheduled increases exists in specialized services. Verisign is exercising moderate pricing power through a predetermined adjustment to its annual registry-level wholesale fees for .com domains. For the broader sector, pricing adjustments appear infrequent, with growth largely attributed to AI-driven demand rather than aggressive price hikes.
The ability to pass through input costs varies significantly by sub-sector. Hardware and component manufacturers are experiencing divergent trends; MSI reports persistent input cost pressures, specifically noting inflation in memory costs and materials driven by a dynamic supply chain and AI demand. In contrast, other firms are offsetting costs through internal efficiencies rather than direct price increases. Applied Materials and Zebra Technologies report that productivity initiatives and favorable business mixes are mitigating cost pressures, while TEL attributes its margin resilience to operational buffers built to withstand a dynamic global environment.
Pricing power is most robust among firms with sole-source advantages or high demand inelasticity. Verisign demonstrates strong pricing power via its scheduled fee increases. Similarly, TEL and Applied Materials are leaders in operational efficiency, leveraging strong market positions to expand margins despite external volatility. Conversely, MSI appears to be a laggard in this cycle, as it is currently absorbing higher component and memory costs, suggesting a relative lack of pricing leverage against its own suppliers in the AI-driven hardware market.
The overall margin outlook for the sector is expanding to stable. Many firms are seeing modest improvements in gross or operating margins driven by operating leverage and productivity. Accenture and TEL report expanding operating margins, while Microchip Technology and NXP Semiconductors are seeing non-GAAP gross margin expansion. Fortinet expects margins to remain stable. While MSI faces headwinds from component inflation, the prevailing trend among peers like Zebra Technologies and Applied Materials suggests that productivity gains and favorable mix are supporting a positive trajectory for net margins.
The pricing environment across the communication services sector remains mixed, with firms employing varied strategies based on their specific market segments. In digital advertising, Meta has implemented moderate to robust price increases, with the average cost per advertisement rising 12% year-over-year. In the live entertainment space, Live Nation (LYV) is seeing robust growth in premium hospitality spending, evidenced by significant per-fan spending increases at venues such as the Ziggo Dome and Hollywood Palladium. Conversely, Verizon (VZ) is maintaining a more stable pricing posture, focusing on disciplined promotional strategies rather than aggressive price hikes to drive sustainable volume-based growth.
The ability to pass through input costs varies by sub-sector. Meta is experiencing persistent inflationary pressure regarding hardware components, suggesting that some input cost increases are being absorbed as the company manages higher component pricing. In contrast, Verizon is offsetting potential margin erosion not through direct price pass-through, but through efficiency gains in customer acquisition and a reduction in aggressive subsidies. Live Nation reports no significant commodity or freight inflation, allowing it to capture premium spending without immediate pressure to offset rising input costs.
Live Nation and Meta emerge as leaders in pricing power. Live Nation leverages high demand inelasticity for premium event experiences to drive robust per-fan spending. Meta utilizes its dominant market position in digital advertising to achieve moderate price increases despite rising internal expenses. News Corp (NWS) also demonstrates moderate pricing power, successfully increasing circulation revenues. Verizon acts as a relative laggard in terms of raw price increases; however, it is strategically conceding aggressive promotional discounting in favor of healthier customer economics and reduced churn.
The outlook for operating margins is generally stable to expanding, though drivers differ by firm. Verizon expects margin improvement driven by a disciplined approach to promotional spending and improved customer acquisition costs. Live Nation is seeing margin expansion through robust growth in high-margin premium hospitality services. However, Meta faces a more complex outlook; while its pricing power is robust, margins are being tempered by significant increases in total expenses, specifically regarding R&D, legal charges, and higher hardware component costs.
Firms in the materials sector are generally raising prices, though the cadence and magnitude vary by sub-sector. Pricing actions range from moderate to robust. ECL reports a steady upward trajectory, with pricing improving to 4% and expectations to reach the 5% to 6% range in the second half. STLD observed a moderate to robust increase in external selling prices, noting a sequential rise of $86. PPG is proactively announcing global price adjustments to keep pace with inflation, while APD is exercising modest pricing power.
The ability to pass through input costs—specifically raw materials, energy, and logistics—is largely intact but geographically inconsistent. BALL reports that pass-through mechanisms for aluminum prices continue to perform as intended. LYB is successfully passing through higher raw material costs in Europe and benefiting from accelerating prices in the Americas. PPG notes an improved ability to increase selling prices in step with raw material, energy, and packaging costs compared to previous cycles. However, pass-through is mixed for APD, where energy costs provide a favorable impact in the Americas but remain a headwind in Europe.
Leaders with robust pricing power include BALL, LYB, and ECL. These firms leverage structural advantages, such as BALL’s integrated pass-through mechanisms and LYB’s cost-advantaged production, to maintain leverage despite a steepening global cost curve for petrochemicals. STLD demonstrates strong power in its primary steel segment, where selling prices have outpaced ferrous scrap costs. Conversely, APD and PPG exhibit more moderate pricing power, with APD particularly constrained by persistent fixed-cost inflation. STLD’s fabrication segment also acts as a laggard, conceding margin to increased steel raw material input costs.
The outlook for operating margins is mixed, leaning toward stability or slight compression depending on the segment. LYB is leveraging production advantages to maintain margins despite geopolitical volatility. STLD is seeing metal spread expansion in steel, though this is partially offset by spread compression in fabrication. For others, margins are softening; APD reports that fixed-cost inflation is impacting margins across the Americas and Europe, and BALL notes that regional earnings were partially offset by higher costs. Overall, while pricing is robust, the net impact on margins remains tempered by persistent input cost pressures.
Pricing across the observed real estate segments remains generally stable, though the cadence and drivers vary by sub-sector. In commercial portfolios, such as those managed by CCI, pricing is characterized by predictable, contractual adjustments, with escalators providing a steady but modest upward trajectory. In the hospitality sector, HST has implemented more frequent increases in room rates to drive revenue growth. However, evidence suggests this momentum is beginning to soften, with HST signaling a moderate deceleration in rate growth expected for the latter half of the year.
Firms are employing a mix of contractual pass-throughs and operational offsets to manage input costs. CCI is leveraging built-in contractual escalators to maintain revenue streams while simultaneously realizing modest relief in site rental operating costs. In the energy space, WY is pursuing long-term cost mitigation through capital investment in renewable infrastructure, specifically through the expansion of solar sites, to offset future energy volatility. Overall, the ability to pass costs to customers appears robust in commercial leases but is becoming more constrained in consumer-facing hospitality.
Pricing power is most robust among firms with locked-in contractual frameworks or high demand inelasticity. CCI demonstrates strong pricing power through the use of structured escalators that insulate revenue from short-term market volatility. HST has historically acted as a leader by aggressively raising room rates; however, it is now transitioning toward a more cautious posture as competitive pressures and softening demand lead to lower growth expectations. Firms lacking these contractual protections or facing high consumer sensitivity are more likely to concede price to maintain occupancy.
The outlook for operating margins is mixed but leans toward stability. For CCI, margins are supported by a combination of steady pricing escalators and a modest decrease in site rental costs. Conversely, HST faces potential margin compression if the expected softening of room rate growth occurs while operating expenses remain elevated. WY’s strategic shift toward solar infrastructure suggests a long-term effort to stabilize margins by reducing reliance on external energy providers. On balance, margins are expected to remain stable for commercial assets while showing slight softening in the hospitality segment.
Pricing activity across the utilities sector remains largely stable, with adjustments primarily driven by regulatory frameworks rather than discretionary market shifts. Firms are generally holding prices steady, though some are implementing modest adjustments to account for new load profiles. For example, PG&E is exploring "appropriate pricing" structures for emerging data center demand, suggesting a strategic shift toward targeted rate adjustments to mitigate cost burdens on the broader customer base.
The ability to pass through input costs remains mixed and highly dependent on regional volatility and regulatory recovery timelines. Consolidated Edison (CNP) reports moderate favorability from regulatory recoveries, though these gains are being partially offset by persistent financial pressures, specifically increased interest expenses. In the energy supply chain, NRG is experiencing divergent cost pressures; while the West segment benefited from lower power supply costs, the East segment faced moderate pressure due to weather-related supply spikes during Winter Storm Fern. Additionally, NRG has seen the impact of fluctuating natural gas prices manifest as unrealized losses from economic hedges, indicating that some commodity volatility is being absorbed rather than immediately passed through.
Pricing power is most robust among firms leveraging operational efficiencies and strategic load management. PG&E demonstrates strong positioning by utilizing internal cost-reduction targets—aiming for a 2-4% reduction in non-fuel O&M costs—to maintain stability. Consolidated Edison (CNP) maintains stable pricing power through established regulatory recovery mechanisms, though its effectiveness is slightly dampened by macroeconomic headwinds. Conversely, NRG appears more vulnerable to exogenous shocks, as its pricing outcomes are more closely tied to volatile power supply costs and mark-to-market hedge fluctuations, suggesting less insulation from commodity swings compared to regulated peers.
The outlook for operating margins is stable to slightly compressing. While PG&E is pursuing modest margin expansion through internal efficiency gains and strategic pricing for high-demand users, other firms face headwinds. Consolidated Edison (CNP) is seeing its regulatory gains eroded by rising interest expenses, suggesting a neutral impact on margins. Similarly, NRG’s margins are subject to regional volatility and non-cash hedge losses, indicating that while some segments are benefiting from lower costs, the overall pricing impact remains mixed.