Profit-Margin Outlook for U.S. Is ‘Extremely Bad’

[marmar]

Oh well, I guess they've got to lay off more people, and boost those returns for the vultu..., I mean shareholders



Profit-Margin Outlook for U.S. Is ‘Extremely Bad’: Chart of Day
By David Wilson


June 21 (Bloomberg) -- Profit margins for U.S. companies are likely to tumble from last quarter’s record, a decline that will lead to much lower earnings than analysts expect, according to economist Andrew Smithers.

“The corporate sector’s outlook is extremely bad,” Smithers, founder and chairman of the investment-advisory firm of Smithers & Co., said last week in an interview. “I can’t see any way out of it.”

As the CHART OF THE DAY shows, profit before interest, taxes and depreciation -- accounting adjustments for wear and tear on buildings and equipment -- amounted to 36.4 percent of U.S. corporate output in the first quarter. The calculation was based on data compiled by the Commerce Department.

The percentage was the highest since the department’s quarterly data started in 1947, as the chart depicts. Smithers, whose firm counsels more than 100 clients on international asset allocation, included a similar illustration in a June 18 report.

Margins “are likely to fall a lot” as governments restrain deficit spending next year, reducing cash flow elsewhere in the economy, the report said. Companies will bear the brunt of the shift as opposed to households, which are heavily in debt and save relatively little, in his view. ........(more)

The complete piece is at: http://noir.bloomberg.com/apps/news?pid=20601109&sid=aVWkHdoaw8MQ&pos=15

[DJ13]

1. Margins “are likely to fall a lot” as governments restrain deficit spending next year

You mean that reduced entitlements going to the lower classes will lead to reduced consumer spending, which drives business revenues lower?

Who would ever have guessed!

:eyes:

[Warpy]

2. Shareholders aren't doing so hot, either

because, while their profits might have broken records, their dividends have not. Most of them are stockpiling cash right now, knowing they're overleveraged and that cash is going to be king for a while.

[Turbineguy]

3. He must be short.

[SunnySong]

4. Profits are up the rich get richer.

Profits are down and it is the poor that suffer.

Perhaps we should tax revenue instead of profit. That way companies can concentrate less on accounting tricks and more on being a better business.