The onward march of inflation has finally forced the Government to concede on its full-year forecasts, with the figure expected to hit 4 per cent by year-end a third up on the original 3 per cent estimate.
Brokers too are adjusting earnings forecasts on the expectation of upward pressure on the domestic cost base.
Merrion has now amended some of its projections and the news is bad for investors in Eircom in particular. The beleaguered phone company has had its earnings per share (EPS) marked down by 8 per cent. Its latest difficulties are attributed to downward pressure on prices in its fixed line business at the same time as its operating costs rise, squeezing margins.
Others to suffer in the Merrion re-rating include food groups Glanbia and Fyffes, which have seen their forecast EPS slipping 7 and 6.1 per cent respectively. Again, it is the low margin nature of their business which is likely to cost them dear.
Among the banks, AIB (-2.9 per cent), Bank of Ireland (-3.1 per cent) and Irish Life & Permanent (-3.9 per cent) all see unfavourable amendments.
On the upside, companies with high margins - such as Elan - or limited exposure to Irish inflation - CRH and Smurfit - are likely to be largely unaffected in the broker's view.
