Interesting analysis here by RBC Capital Markets. In an article on Friday Bloomberg cited a report that says profit margins could come under pressure as revenues stagnate:
“Growing disappointment with U.S. companies’ revenue may be a harbinger of lower profit margins, according to Myles Zyblock, chief institutional strategist at RBC Capital Markets.
As the CHART OF THE DAY shows, the gap has widened this quarter between the percentage of companies in the Standard & Poor’s 500 Index that are exceeding analysts’ sales projections and those coming out ahead on earnings. The figures are based on comparisons with average estimates in Bloomberg surveys.
Fewer than 30 percent of S&P 500 companies are delivering so-called positive surprises on revenue, according to the data. The proportion has fallen from 52 percent a year earlier. S&P 500 earnings surprises have been more consistent, falling to 64.5 percent from 69 percent during the period.
“The heat is on for companies to preserve margins,” Zyblock wrote yesterday in a report. Their success will depend on pricing power, or the ability to raise prices without losing business, the Montreal-based strategist wrote.”
Read Some Related Articles on Pragmatic Capitalism -
The End of Stock Picking
Jason Zweig has a nice piece in yesterday's Wall Street Journal on the end of the stock picking asset manager. He notes: The debate about whether you should hire an “active” fund ...read more
Europe vs USA: the Unemployment Divergence
Here's another perspective on the incredible divergence in the US economy and the European economy (via Calculated Risk): ...read more
Q&A - Ask Me Anything
Since I am trying out the site without comments I figure the least I can do is open things up to a Q&A more often. Feel free to have at ...read more
It’s Not a Chase For Yield, It’s a Chase For Fees
“One lesson from 2008 is that if it’s very complicated and you don’t understand it, maybe you shouldn’t buy it.” – Harry Markowitz ...read more