So that’s it? Analysts are saying that we saw the zenith of corporate America’s earnings growth in this year’s first quarter, which topped out at a 25% increase. From here on out, according to a survey by FactSet researchers, the pace of profit growth will slow.
Powered by tech companies and by robust consumer spending, US corporate earnings have been steadily accelerating. Some of that was the adrenaline shot from the federal tax cuts that took effect early this year. Now, though, the nation’s economy faces several headwinds, in particular what appears to be a looming trade war with China and major US allies like Canada.
But the good news is that FactSet finds analysts don’t expect any cliff dives in the earnings trend going forward. For the second quarter, the consensus is for a 19% advance, with 21% in the third period, and 17% in the fourth. Next year, the picture is for the low teens or high single digits.
And a slowdown does not always portend a recession and a bear market. An RBC Capital Markets study discovered that a slowdown in earnings increases took place in 1994, 2004, and 2009, yet the economy and the market continued to do well.
Tags: Corporations, Earnings Growth, FactSet