Corporate America’s ability to outrun the weak economy is waning. The Great Recession forced companies to work leaner, meaner and smarter. It explains why job growth has been meager, confidence is in short supply and U.S. companies are looking for growth overseas.
By the end of the coming week, more than two-thirds of the companies making up the S&P 500 stock index will have turned in their latest financial report cards. Don’t be surprised when the results are better than expected. Executives have gotten very skilled at managing Wall Street expectations.
But don’t be shocked if the rest of the year and 2012 don’t shape up to be quite as strong. Wall Street analysts tend to be the glass-half-full types.
Yes, profits still are anticipated to grow, but at a much slower pace. At the beginning of July, earnings in 2012 were forecast to jump 13 percent. Now they’re expected to be barely 10 percent higher. This is a sharp drop over the course of three months.
The drop has come as Europe struggles to come up with a fix for its government debt troubles and the U.S. government bickers and delays addressing its own economic shortcomings.
No worker would complain about a 10 percent pay raise next year, but investors are a tougher lot.
They expect companies to find ways to avoid the worst of a tepid economy.
Tom Hudson, anchor and managing editor of “Nightly Business Report,” can be followed on Twitter HudsonNBR.