The Lehmann
Letter (SM)
This letter
believes that profits and profit margins (profitability) remain the stock
market's greatest challenge for further appreciation. The June 7 edition
reported strong growth for profits and a high plateau for profit margins at all
corporations in the first quarter. The challenge: Will profits continue growing
and margins remain high?
This morning
the Census Bureau reported FLAT first-quarter manufacturers' profits and profit
margins:
Is this an
omen for all corporations and the stock market? Have profits and profitability reached
a ceiling? Take a look at the charts to put the following data in historical
perspective.
Manufacturers’
Profits
(Click on
chart to enlarge)
(Recessions
shaded)
Manufacturers’
Profit Margins
(Click on
chart to enlarge)
(Recessions
shaded)
Profits
hovered at about $150 billion throughout 2011 and this morning's report places
them at $148.0 billion in this year's first quarter. Profit margins were 8.7
cents per dollar of sales in the first quarter, also about where they were in 2011.
Sales continue to grow, but profits and profitability do not.
That's worth
repeating: Sales revenue grew but total profits and profit margins did not.
Let's hope manufacturers break out of this range and that manufacturers' latest
report is not an omen for all business.
(To be fully
informed visit http://www.beyourowneconomist.com/)
© 2012
Michael B. Lehmann
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