Northwest Arkansas Democrat-Gazette
Slowdown expected
Lower taxes helped a majority of companies beat Wall Street’s profit forecasts last year, from heating and air conditioning manufacturer Johnson Controls to credit card issuer American Express.
Those gains were likely a one-off however, analysts say. They expect corporate earnings growth to slow sharply this year.
“Ultimately, we wouldn’t be surprised if every quarter this year ends up in negative territory,” said Morgan Stanley analyst Michael J. Wilson.
Companies reaped the benefit of a tax-cut fueled boost throughout 2018. That helped growth, despite economic uncertainty around trade issues.
Johnson Controls beat forecasts by 75 percent, American Express by nearly 30 percent. Will they surprise again this year?
Analysts doubt it. For example, Johnson Controls is forecast to report earnings per share of 33 cents in the current quarter, far below the 53 cents-a-share it booked in the same period last year.
Earnings will return to a normal pace of growth in 2019, said Sunitha Thomas at Northern Trust Wealth Management.
“I think everybody knew 25 percent earnings growth was not a sustainable environment,” said Thomas.