Earn­ings grow again

Chattanooga Times Free Press - - BUSINESS -

The profit re­ces­sion is clearly over.

For much of the last two years, prof­its have been fall­ing for big U.S. com­pa­nies. The plung­ing price of oil was dec­i­mat­ing rev­enue for en­ergy com­pa­nies, while the tepid global econ­omy was hold­ing back the rest.

The trend be­gan to turn last year, and it cul­mi­nated in the most re­cent earn­ings re­port­ing sea­son, which has just wrapped up. With 98 per­cent of com­pa­nies in the Stan­dard & Poor’s 500 in­dex hav­ing re­ported, earn­ings per share surged 13.9 per­cent in the last quar­ter from a year ear­lier. It’s the strong­est quar­ter of growth in nearly six years, since the sum­mer of 2011, ac­cord­ing to Fac­tSet.

The mini-re­cov­ery in the price of oil has helped, and a bar­rel was trad­ing at about $50 per bar­rel at the end of March, up from $38 a year ear­lier. Prof­its for com­pa­nies in the fi­nan­cial, tech­nol­ogy and raw ma­te­ri­als in­dus­tries were also par­tic­u­larly strong last quar­ter.

Investors are re­lieved to see the surge in earn­ings. Af­ter years where stock prices rose much faster than cor­po­rate prof­its, wor­ries per­co­lated that the mar­ket had grown too ex­pen­sive. Last quar­ter’s strong profit growth could of­fer some jus­ti­fi­ca­tion for the mar­ket’s cur­rent record highs.

Can prof­its keep up? Many com­pa­nies say they’re see­ing im­proved op­ti­mism among their cus­tomers, but signs are mixed about how much that will trans­late into higher sales.

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