Corporate profits are back. Or are they?
Quarterly earnings for the Standard and Poor’s 500 index have fallen for most of the past two years, even as stocks have hit fresh records. That’s odd, and many investors are worried.
Now word on Wall Street is the bad streak may be over.
For the fourth-quarter reporting season that begins next week, financial analysts are forecasting a 4 percent rise in profits compared to a year ago. That would mark the second quarterly gain in a row, according to S&P Global Market Intelligence.
Two is trend, right? Or is it three?
No worries. The analysts are even more optimistic about the next four quarters, predicting gains of 9 percent or higher for each of them.
Much of the credit goes to oil prices and interest rates.
Crude prices have doubled after hitting a 13-year low in February, helping oil drillers. And higher rates will allow banks to charge more for their loans.
Of course, the nearly always sunny analyst community isn’t the most reliable of forecasters. And if oil and rates can go up, they can always fall again.
On second thought, better to check back after a few months before declaring an earnings victory.