What Virus? Corporate Profits Surpassed Pre-Pandemic Levels In Q4

What Virus? Corporate Profits Surpassed Pre-Pandemic Levels In Q4

The pandemic is over according to corporate earnings in the US. Or at least that's a crude way to conceptualize of fourth quarter results. Headed into reporting season, consensus expected S&P 500 profits to fall 11% YoY. But, with 367 firms representing 84% of index market cap on the books, earnings actually rose 2% from Q4 2019. "Profits have already surpassed their pre-pandemic level," Goldman's David Kostin wrote Friday evening, adding that the results "easily" beat analyst forecasts an
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One thought on “What Virus? Corporate Profits Surpassed Pre-Pandemic Levels In Q4

  1. ““S&P 500 operating leverage is at the highest level in years, helping margins grow alongside revenues [and] high SG&A expenses indicate room for firms to cut costs,”

    That’s fascinating and although current trends are good, the higher the level of operating risk, the greater the risk if throughput (revenue) falls. I find it interesting that labor costs are only 13% of S & P revenues as so much of our economy is comprised of service businesses which are labor intensive and most of the labor costs at manufacturing businesses are actually expenditures for services — accounting, HR, engineering, materials management, etc. Also, with as much outsourcing as our firms do, the fact that OL is so high is a bit of a surprise. That ratio rises in conjunction with fixed costs but outsourcing effectively converts fixed costs into variable costs and lowers OL. I would love to know more about these trends because there seem to be some contradictions in the data. The latter part of the quote is logical since most firms find it far easier to cut costs than to raise revenue.

    Thanks for including this info here. Most people don’t seem to really understand operating leverage and its systemic impact on profits. Boeing and the airlines will explain. So can our utilities.

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