[U.S.] Companies Are Doing Well, Even if Economy is Not (Industry Week â Agence France-Presse) "Major companies are packing away record profits even as the economy falters, unemployment remains high and the debt-ceiling crisis has shaken confidence in the country, analysts said. In July, corporate giants such as 3M, Caterpillar, Goodyear, Microsoft and Apple reported all-time high revenues in the second quarter of 2011, though the stock market still slumped amid fears of an economic slowdown and a possible government default. Of the companies in the S&P 500 list of large-cap firms which have reported their quarterly earnings to date, 72% have beaten analysts' forecasts, according to Standard & Poor's analyst Howard Silverblatt. Moreover, if the current trend keeps up, the S&P 500 companies are poised to have their most profitable quarter ever, he said. "Earnings are basically the only thing holding up the market at this point," Silverblatt said. "They're amazing numbers." The prosperity of large corporations may seem surprising at a time when many indicators show profound weakness in the world's largest economy. The unemployment rate stands at 9.2%, and the government last week said growth in the second quarter was a feeble 1.3%, far below economists' expectations. But analysts say corporations are doing well in part because they slashed costs during the recession, laying off workers and reining in spending on plants and equipment, which boosted profit margins. "They got lean and mean," said Marc Pado, U.S. market strategist for Cantor Fitzgerald. "Corporate America is very strong. They were preparing for a downward turn. Everybody was talking about a double-dip recession and they were bracing for that. They were holding on to cash, not hiring new workers and voiding themselves of inventory." The total cash held by U.S. non-financial corporations surged to $1.2 trillion at the end of 2010, up 11.2% from a year earlier, Moody's Investors Service said in a report last week. One reason that companies are holding so much cash â and not spending it on investments or hiring new workers â is that they are worried about the shaky economic situation in the United States and Europe. "Management teams remember the rapid shutdown of the financial markets in 2008 and prefer to hold large cash balances even though the money is earning a low return," Moody's said. Another notable result from the latest round of earnings reports is that many companies are showing their best results in fast-growing markets such as Asia and Latin America rather than at home. General Electric, Caterpillar and Dow Chemical were among the corporate stalwarts which reported strong emerging market sales that helped offset slow growth in the United States in the second quarter. "Dow's broad geographic reach and leadership in many attractive, high-growth end-markets firmly position us to benefit from the megatrends that are defining our future," Dow Chemical chief executive Andrew Liveris said last week as the company announced a 73.4% rise in quarterly profits. With the weakness of the dollar, which makes American exports cheaper for consumers around the world, that trend is only likely to accelerate in the future, analysts say. "The big growth is happening outside the U.S., not inside the U.S., and you've seen a lot of companies increase their export sales as a percentage of the total," said Cantor's Pado."
More horseshit. I tell ya, how do you do it, Ricter? Didn't you just accuse someone the other day of being king of the cut-and-paste? Because when it comes to the economy, that's all you do! Corporations are beating earnings by smashing already tight margins, one time accounting gimmicks and - most of all - by calling down guidance in the first place. The analysts have soft expectations, which are easy to beat. Now I will grant you that a handful of companies are having stellar earnings (Apple, etc), but that isn't indicative of the rest of corporate America. In the consumer packaged goods sector (which I am in) companies are struggling day in and day out to fight off inflation. We're talking names like Kraft, Unilever, Mars, P+G, etc. The fact that these corporations are holding large cash balances is because they don't believe this economic "recovery" is real at all. As for the weakness of the dollar - yeah, that's a great thing for the US. We'll be springing about in no time! Hell, just move it to zero, who cares if inflation goes to infinity! None of this is a good sign. You would be wise to learn a bit more. Or are you "all in" in the stock market?
and this morning the challenger report showed stepped up firing. the most in 16 months. it puts a lie to the republican meme that if only we cut taxes corporations would hire. corporations only keep as many people as needed to satisfy demand no matter how much money they make.
And that relates to the point of my posts. They were not economic good news (so Tsing, your criticism is off the mark this time, I know it's bad). The parts I emphasized in both posts are all data counter to republican economic theories.
In 2013, the Bush tax cuts would expire. Obamacare is a huge tax increase coming soon after. Regulations by the EPA, the Frank-Dodd Act, etc are screwing with business. The National Labor Relations Board is screwing with Boeing on putting a plant in S Carolina. etc etc People are "investments". If a corporation can make a decent "return on investment" in hiring additional workers, it'll hire workers.
Lots of big businesses want less regulation, they want to grow and they don't care about the negative or unforeseen consequences. They leave that to government, and rightly so, and expect that their competition will at the end of the day have to play by the same rules. You're right about an ROI perspective on hiring, but the return is calculated with sales or future sales, not by cash reserves. In fact, cash reserves are not even necessary where credit is available. There will be no hiring until sales justify it.
Precisely. Even so, the steadfast belief in Right Wing faith-based economic "theory" continues unabated. Factual evidence to the contrary is a mere speed bump on their road to glory and the promised 72 tax loopholes.