Interest Expense
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.
What Can Margins Do For An Encore?
A massive drop in corporate tax payments lifted the third quarter NIPA profit margin back to the 10% level for the first time four years. But while we try not to always view the glass as half empty, we find it troubling that margins remain well-below their 2012 highs (10.6%) in spite of this one-time windfall.
After The Tax Cut, Watch Out For This Hike
Analysts are still coming to terms with the impact of the big corporate tax cut, as shown by the dispersion still existing across S&P 500 EPS estimates in 2018. But they should also be watching the line item that’s contributed the most to the breakout in profit margins above historical levels: interest expense...