things are looking better.the enviroment is ready for mergers aquistions esp in the smaller cap stocks.just giving our board a foundation of the economic climate as that has a true impact on what happens on our level......................................US Corporate Profits Surge
by John Shipman, Paul Vigna
Monday, January 31, 2011
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With about 50% of companies already reporting, fourth-quarter profits for the biggest U.S. corporations have been exceptionally strong and 2010 is poised to deliver the third-best full-year gain since 1998—with sharp advances in the telecommunications and energy sectors and a rebound in financial services.
Excluding financial companies, whose losses in 2009 skewed results, weighted earnings for the companies in the Standard & Poor's 500 Index are up 17% on an as-reported basis for companies representing 54% of the group's market value.
Unlike the initial period of the recovery, when cost cutting strongly boosted profits, the results suggest a solid pickup in spending by businesses and consumers. Sales for the group rose about 9% from a year ago, according to S&P. Job cuts continue to be critical under tight expense controls.
[More from WSJ.com: Revenue Growth Perks Up ]
Bolstered by exports and consumer spending, overall U.S. fourth-quarter sales excluding inventories jumped by 7.1%, according to a report Friday by the U.S. Commerce Department. The gain far outpaced the 0.9% increase in the third quarter.
Combined with a decline in imports, "we have a healthier mix" ahead in 2011 for economic performance, said Brian Jones, an economist at investment bank Société Générale.
S&P now forecasts fourth-quarter earnings will rise about 32% over a year ago when all 500 companies report, more than three times as fast as its forecast at the outset of this reporting season. Profits then were seen rising 9.8%, with sales expected to be up 6%, according to S&P.
At roughly this point a year ago, about half-way through earnings season, corporate profits excluding the banks were running about 47% higher than the year-earlier period. Sales growth a year ago was about 5.9%. But at that point, the recovery was just beginning and comparisons were off much lower earnings.
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For 2010, S&P estimates profit growth will be about 51%, a percentage gain surpassed only by the previous year's record 243% jump and a 77% gain in 2003, according to S&P.
Financial companies are enjoying the biggest jump in profit gains, albeit over a quarter in 2009 where they as a group lost money, according to S&P. Telecommunications companies that have reported so far saw profits rise 58%; materials companies including steel, mining and chemicals are up 45% and energy concerns are up 40%. For instance, Chevron Corp.'s (NYSE: CVX - News) fourth-quarter profit rose 72% on higher oil prices and better refining margins.
Banks benefited this quarter from greatly diminished write-downs, and less cash set aside for loan losses, and in some cases cash actually released from money previously set aside to cover losses. For instance, U.S. Bancorp (NYSE: USB - News)reported fourth-quarter profit of $974 million, up from $602 million a year ago, as cash it had set aside for loan losses declined by 34%.
The biggest laggards include utilities, down 18%, and health-care companies, down 17%. Columbus, Ohio, utility American Electric Power Co. (NYSE: AEP - News) posted a 26% decline in profit due to a required refund to customers and employee-severance costs. Pharmaceutical companies are facing patent expirations, slowdown in health-care spending, price cuts in Europe and tougher regulatory hurdles for new products.
[More from WSJ.com: Chinese Banks on the Prowl in Europe]
One trend that marked 2010 results and continues to crop up this year: job cuts. Drug maker Abbott Laboratories (NYSE: ABT - News)last week said it would cut 2% of its work force, or 1,900 jobs, while home-improvement retailer Lowe'sCos. (NYSE: LOW - News) said it is eliminating roughly 1,700 store-management positions and hiring 8,000 to 10,000 part-time hourly employees to man the sales floor during weekends. Boeing Co. (NYSE: BA - News), struggling to get a new jet into production, said it will lay off 1,100 workers.
Already this year, 11 banks have closed their doors, on top of 157 banks last year, adding to industry unemployment rolls as new owners consolidate. Meanwhile, several big banks, including State Street Corp. (NYSE: STT - News) and American Express Co. (NYSE: AXP - News), also have recently announced layoffs or intentions to cut jobs.
The sharp rise in energy and raw-materials costs in recent months has only begun to impact results. Companies from Ford Motor Co. (NYSE: F - News) to Colgate-Palmolive Co. (NYSE: CL - News) say rising commodities prices hit their final-quarter performance and are expected to play a bigger role in results this year. Delta Air Lines Inc. (NYSE: DAL - News), stung by higher jet-fuel prices last quarter, said fuel will be its "biggest issue" this year. Industrial equipment maker Parker Hannifin Corp. (NYSE: PH - News) also cited rising costs "across the board" in its fourth-quarter results.
Procter & Gamble Co. (NYSE: PG - News) expects rising costs will cut about $1 billion from earnings in its current fiscal year ending June 30, double the impact it expected at the start of the fiscal year. Commodity costs were up 6% from the previous quarter and 20% higher than a year ago, Chief Executive Bob McDonald said Thursday.
Grocery-store operator Supervalu Inc. (NYSE: SVU - News) has been struggling with rising food costs, and finally said it plans to pass price increases along to its customers. At the same time, it's cutting overhead by closing underperforming stores and cutting corporate staff.
Colgate-Palmolive now expects commodities costs will rise between 8% and 10% in 2011; in October, it projected an increase between 4% and 6% this year. To compensate, the company will continue with its "overhead reduction initiatives," and forecasts prices rising between 1% and 2%. Pricing, Chief Executive Ian Cook said on a conference call, will be "consistent with what we see happening in the marketplace."
The Upshot comments on corporate earning trends
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64 commentsShow: Newest FirstOldest FirstHighest RatedMost Replied Post a comment Comments 1 - 10 of 64FirstPrevNextLast0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentReally 4 minutes ago Report Abuse This is happening on the backs of us think 20-25% employment. While American companies add jobs overseas. Caterpillar building three new plants in China -$300 a month workers. Comeon. The corporations that caused it need to fix it. The problem in our country over last 30 years big business has outsourced too much to save a buck and is not looking out for our country's welfare. Democracy is a form of government. Capitalism is an economic system. If you let capitalism run rampant without checks and balances you get what we have now a Great Depression once again. Why does history repeat itself because of corporate greed. Corporations just maximize profit at the expense of everything else and have forgotten their civic duty to their country men and their country. USA FIRST!!!!! Corporations need to start thinking like us.
So now we have to do what our forefathers did and break up the robber barons - banks, monopolies to bring control back to the Democracy. Regardless of your party time to become part of the solution and not part of problem.
In addition, to spending cuts which both parties are notorious for not making and just talking. We not govt need to take action to fix this deficit we need to create USA jobs that will put more USA citizens back to work increasing our tax base which will reduce this deficit.
That is not going to happen with all our USA companies outsourcing twice as many jobs as they create at home.
That is not going to happen when H1B Visas workers are running rampant in USA.
That is not going to happen when illegal immigrants are pouring over an open border.
That is not going to happen when we keep buying goods not made in USA.
To fix all this I cant say this enough buy only USA made goods and software to send a message to companies that dont make it here, that employ H1B Visas or outsource. That we wont do business with you. Just say No.
If your a CEO, VP, Director or Manager in USA companies you call the shots think about your country first. This is your Civic Duty so start owning up to it. Start employing your fellow Americans instead of outsourcing their jobs, no more outsourcing and no more H1B Visas. The Indians and Chinese each have one billion people they can take care of themselves we need to take of our own. Healthcare companies denying coverage to sick that is baseless and cowardly why did it take legislation to stop it?
You can call the shots then call them. Just say No.
USA citizens write your Congress person tell them what you want. I can only write mine so you have to write yours. Take five minutes go to their website and write them every week. We all must do this and send the messages we want them to hear. Big Companies do this all the time it is called Lobbying. Enough is enough time for American voices to be heard and for our voices to be acted upon. Vote with your pocket book, Speak to your Congress person, Make the right calls at work. This is your country. If keep outsourcing eventually their will be a revolution from the unemployed like is happening in the Arab world and in this country they will use their guns to put a bullet in the head of a CEO or a manager. Think about it next time you outsource work from the US. Be careful when you drive by in that new Porsche or SL.
We outsource all of our manufacturing to China and all of our high tech to India and wonder why USA is dying and its citizens are unemployed there is your answer. Fix it Mr. CEO you caused it then you can fix it. Insource and stop hiring H1B Visa from Infosys, Wipro and every other Indian Outsourcing company you can think of. Start building manufacturing plants back here. Think like Henry Ford if my worker cant afford my goods then I wont be able to sell my goods. Hey Johnson and Johnson profits a little weak for the year since you have unemployed so many if the USA. Karma is a @#$% isnt it. Fix it!!!!!
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0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentEd 4 minutes ago Report Abuse What the WSJ conveniently neglects to mention is these annual increases are relative to the previous year. 1998 saw the "Asian Flu" but in no means was the economy then anywhere near the hideous state as seen in 2009. Further, these "surging" profits aren't correcting the domestic unemployment catastrophe, which doesn't look to change. It's only a matter of time before the other shoe drops.
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0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this commentblackhercules 4 minutes ago Report Abuse Great news!!! Republicans do not like it and will try and spread as much bad news as possible. They care more about getting into office than our country. PATHETIC.
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3 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentabc 6 minutes ago Report Abuse Corporate cash in huge profit, while unemployment is still high. This tell me companies will not hiring anytime soon. Why would they ?
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0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 2 users disliked this commentMozart 7 minutes ago Report Abuse Fantastic news for America. All these record profits and low debt on the balance sheets means that American companies can start to spend some of those profits on R&D, developing new products and investing in America. I applaud Obama for his stewardship of the economy and steering us out of the Bush great recession. We can take a lesson fm the conservatives over in the UK and the double dip they are in now. Had Obama listened to conservatives in this country, we would be in a double dip. Even now, people like Cantor and Boehner are trying very hard to implement the same failed measures that drove the UK into a double dip recession.
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0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentA Yahoo! User 8 minutes ago Report Abuse Is Yahoo censoring references to POMO?
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1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentSpinmaker 10 minutes ago Report Abuse Hooray! Now they can pay the Federal Taxes that their layed off, fired , workers can't pay!
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3 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentAllen 11 minutes ago Report Abuse Sure the profits are up, when you look at Chevron 72%, Shell 68%, Exxon/Mobil 54% all on the backs of the American People. Where is the outrage for the way these companies continue to rape the American people. And Obama is their agent. Don't drill, stop off shore drilling, don't open Alaska, don't Mine Schale Oil, don't build Nuclear, don't expand clean coal.
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1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentLurker 11 minutes ago Report Abuse The United States of Corporations..
Brought to you by Carl's Jr.
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1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this commentLurker 12 minutes ago Report Abuse Whew.. so happy the corporations are doing well.. The United States of Corporations..
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