S&P 500 results hint at recovery; earnings lag behind pre-recession levels

Wednesday 27th January 2010

Among companies on the Standard & Poor’s 500 that have reported so far there are early indications that an earnings recovery is underway after nine quarters of dwindling profits.

The 14% of S&P 500 companies that have reported so far, mostly financial firms, have had 20% year-on-year sales growth, said Keith Poore, head of investment strategy at AXA Global Investors in Wellington.

Consumer goods, healthcare and technology are all showing more than 5% revenue growth, he said. “Total earnings are beating expectations again, so margins must be topping expectations.”

However, total earnings per share are still about 40% below where it was pre-recession, while sales per share is about 15% below where it was.

More than 130 companies in the S&P 500 release their earnings this week.

Profits for S&P 500 companies may have surged 73% in the fourth quarter, according to Bloomberg. The S&P 500 has advanced 31% in the past 12 months even with the recent bout of risk aversion. The index touched its lowest level in 13 years in early 2009.

The US economy emerged from recession in the third quarter, picking up pace in the final three months of the year. Government figures for gross domestic product are due at the end of the week.

The world’s biggest economy expanded at an annual rate of 4.6% in the fourth quarter, according to a Reuters survey, from a 2.2% pace in the third.

“As the Americans say, there is still a ‘ways to go’ to get back to where we were,” Poore said.

Businesswire.co.nz

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