As Stocks Hit New Highs, Money-Losing Companies Mushroom

The number of loss-making companies in the U.S. has bloated to 40% over the last 12 months, the “highest level since the late 1990s of post-recession periods,” says a recent article in The Wall Street Journal. The article cites Tesla as the biggest of the loss makers, noting that its share price doubled within three months: “Tesla shows a desire by investors to back disruptive companies as they build their sales.” General Electric, with a… Read More

Businesses are Guiding Down Earnings Estimates

According to an article in Bloomberg, “the number of S&P 500 companies saying profits will trail analyst estimates outnumbered those saying they’ll beat them by a ratio of 8-to-1 in the third quarter,” the highest level shown by Bloomberg data going back to 2010. The article cites possible reasons, including: After their predictions were “trounced at record rates in the first half,” analysts lifted estimates to unrealistic levels. Companies are “making room for the quarterly… Read More

U.S. Corporate Earnings Trend Could Be Short-Lived

In a recent article for Financial Advisor magazine, Robert Shiller discusses whether today’s share prices are justified by the growth in reported earnings. “With prices and earnings moving together on a nearly one-for-one basis,” Shiller writes, “one might conclude that the US stock market is behaving sensibly, simply reflecting the US economy’s growing strength.” But Shiller argues that earnings are volatile, adding that “sudden sharp increases tend to be reversed within a few years. This… Read More

Profits Up at U.S. Firms

“America’s biggest companies are reporting some of the strongest earnings growth since the recession, boosted by lower tax rates and a robust U.S. economy that is fueling demand across industries.” This according to an article in The Wall Street Journal. The article explains that robust consumer and business spending, along with higher commodity costs and tariff concerns have prompted companies to raise their prices. While profits are being supported by the recent corporate tax cut,… Read More

Slower Earnings Growth Will Test Bull Market

Many analysts say that the rapid growth in U.S. corporate earnings may have peaked in the first quarter of this year, according to a recent article in The Wall Street Journal. According to FactSet data, the article says, earnings growth is expected to reach 19% in the second quarter, 21% in the third and 17% in the fourth, with numbers in the single digits next year. But some analysts argue that the slowing might be… Read More

Corporate Profits Weaker than They Seem

While U.S. companies are reporting strong profits in the first quarter, government data reflects otherwise. This according to a recent article in The Wall Street Journal. Thomson Reuters data shows that profits for companies in the S&P 500 grew by 26.3% in the first quarter compared to a year earlier, but Commerce Department data released in May shows that profits increased by a mere 0.1% over the same period. The article adds that if the tax-cut… Read More

The Tax Law Has U.S. Companies Making Big Plans

The tax bill will have a significant impact on corporate finances, reports a recent Wall Street Journal article, although the effects “can vary widely by company.” According to Natixis chief economist Joseph LaVorgna, analysts are expecting the legislation to “provide a 7% to 8% boost in aggregate per-share profits for companies in the S&P 500 this year,” a big portion of which will come from increased corporate spending. “Someone else’s capital outlay is another company’s… Read More

Best Earnings Season Since 2011

As of last week, the majority of companies that reported earnings have beaten estimates, making this earnings season one of the best since 2011. This according to an article in last week’s Barron’s. The upbeat results, in many cases, apply to both the top and bottom lines, the article says, with much of the outperformance “driven by the big year-over-year jump in energy prices…as well as rising interest rates.” While first-quarter earnings are set to expand… Read More