U.S. Corporations Predict Earnings To Fall Short Of Expectations
Companies like FedEx and Intel are projecting lower quarterly profits because of weakening worldwide demand, the New York Times reported. The same trend can be traced in overseas company also, as British luxury retailer Burberry expected profits to fall short of expectations.
The bleak earnings outlook can be attributed to several factors, ranging from the sluggish economy in the U.S., recession in Europe and stagnant growth in China. Uncertainty over tax increases and spending cuts in Washington that might loom ahead also has manufacturing companies holding off on making new hires.
Experts say the cycle of steady earnings increases may have come and gone, despite the Standard & Poor's 500-stock index reaching its highest close since 2007. Earnings for a typical S&P 500 company are expected decline about 2.2 percent in the third quarter from a year ago.
“A lot of the profit gain you had in the last few years was a bounce from the recession and a result of very aggressive cost-cutting,” said Ethan Harris, chief United States economist at Bank of America Merrill Lynch. “Those factors are going to be very hard to replicate.”