Mish's Global Economic Trend Analysis |
Sharp Decline in Earnings and Revenue Estimates; Chart Explains Four Major Waves of Earnings Growth Posted: 27 Jul 2012 11:09 AM PDT For the first time in three years, US Quarterly Earnings are Poised to Drop. Third-quarter earnings of Standard & Poor's 500 companies are now expected to fall 0.1 percent from a year ago, a sharp revision from the July 1 forecast of 3.1 percent growth, Thomson Reuters data showed on Thursday.Don't Worry Companies Will Still "Beat the Street" In spite of those downgrades, history suggests corporations will still "Beat the Street". even in 2008 and 2009 the majority of firms beat estimates. Here is the way the process works:
Percentage of Companies that "Beat the Street" click on chart for sharper image The last time companies failed to "beat the street" was third quarter of 1998. At the earnings trough in third quarter of 2008, 58% of companies in the S&P 500 still managed to "beat the street". The above chart from Understandings Earnings Estimates by James Bianco on the Big Picture Blog. Corporate Profits Inquiring minds may be interested in charts of corporate profits. click on any chart for sharper image Corporate After-Tax Profits As Percent of Real GDP Four Major Waves of Earnings Growth
Bubbles Don't Benefit Real Economy Government sponsored repatriation tax holidays along the way also added to corporate profits, as did the Fed paying interest on Excess reserves now sitting at about $1.5 trillion parked at the Fed. Little of this benefited the real economy or produced any lasting jobs. Housing and finance jobs collapsed in the global financial crisis and are not coming back. Nor is another internet boom on the horizon. With each crisis, the shrinking middle class has suffered at the expense of banks and corporations able to export jobs and capital. Small US Corporations not able to get the same tax benefits as GE, Apple, Google, Microsoft, etc., have not benefited from Fed policy. Four Solutions
Regarding point number 2, please consider Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold's Honest Discipline Revisited Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
You are subscribed to email updates from Mish's Global Economic Trend Analysis To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
Google Inc., 20 West Kinzie, Chicago IL USA 60610 |