America’s economy is booming. Why aren’t its bosses happier?
Good news about America’s economy seems to keep rolling in. In the third quarter gdp expanded by a barnstorming 4.9% in annualised terms. Heading into earnings season, the month or so each quarter when most firms report their latest results, a stream of upbeat economic figures led stockmarket analysts to hold their profit expectations for the quarter steady, rather than trim them as they normally do. Many called the end of America’s corporate-earnings recession.
Such optimism now looks justified. Following a hat-trick of consecutive year-on-year quarterly profit declines, America Inc’s bottom line is growing again. According to FactSet, a data provider, of the roughly half of big companies in the S&P 500 index that have reported their latest results, 78% have beaten profit expectations (see chart 1).
Yet the mood during the quarterly carnival of conference calls has hardly been celebratory. Plenty of bosses failed to excite investors despite bringing them sound results. The reaction to the performance of big tech was particularly discordant. Alphabet, Google’s parent company, heartily beat profit forecasts but saw its share price sink by 10% after investors were underwhelmed by how its cloud-computing division was doing. Meta’s warning on macroeconomic uncertainty meant that the social-media empire’s biggest-ever quarterly revenue figure went unrewarded by markets. The lingering possibility of a recession and anaemic levels of corporate dealmaking overshadowed banks’ profits from lending at higher rates of interest.
2023-10-29 11:21:39
Link from www.economist.com