Corporate Profits
Labor Is The Limiting Factor
If the economy slips into recession, the Fed will get all the blame. But it’s worth taking a step back to consider that the die has already been cast: The “capacity” for the U.S. economy to grow is nearly exhausted. Specifically, we’re referring to the capacity available in the labor market.
Valuations And The Earnings Recovery
Analysts at Standard & Poor’s will soon confirm what’s been known for several months: The earnings downturn associated with the COVID recession was the shallowest and shortest of any recession-related EPS decline.
A Great Profit Quarter Was “In The Bag”
Economists marveled at the rebound in third-quarter NIPA corporate profits to new all-time highs, but it’s just “bean bag” economics from more than a century ago.
Are Earnings Set To “Gap” Higher?
We are troubled that the bullish optimism has spilled over into the 2020 estimates for S&P 500 earnings. Zero growth in 2020 is probably not a bad guess for NIPA figures, but S&P numbers don’t always follow suit.
It’s Not What They Borrowed, But How They Used It
Following the deflationary bust of 2007-2009, the last decade was expected to be one of deleveraging. Only U.S. consumers appeared to get that memo, however.
Profits Have Peaked
With the S&P 500 EPS count steadily shrinking and managers getting ever more creative with “adjusted EPS,” corporate profits measured with standardized accounting rules merit a closer look.
An Economy This Healthy Is Hostile To Profits
It’s hard to grow profits when an economy’s resources are already fully employed, a fact we highlighted when the U.S. Output Gap turned positive several quarters ago. Therefore, the first quarter drop in NIPA corporate profits, reported yesterday, shouldn’t have come as a surprise.
Margins Prove Capitalism Still Works
Corporate profits were outstanding last year, but even the benefit of a 40% cut in the top income-tax rate wasn’t enough to lift the net profit margin back to the all-time high of 10.6% established in early 2012. Still, the latest 10.0% figure is more than a percentage point above the 2007 cycle high and about two points better than any other cycle high.