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"The record growth in earrings is primarily due to increasing sales, strong margins, and reduced production costs," said Howard Silverblatt, equity market analyst, Standard & Poor's. "Tax cuts have also played a role, and with interest expenses down due to refinancing and low rates, a number of companies are taking the opportunity to pay off long-term debt. For example, 36 companies have no long-term debt whatsoever, compared to 23 companies just 5 years ago."
With 70% of the companies in the S&P 500 having reported on Q1, Standard & Poor's has lifted its quarterly operating earnings estimate to $15.39 ($143B) and raised the as-reported estimate to $14.00 ($130B). This represents a quarterly operating increase of 23.3% over Q1, 2003.
For 2004, S&P 500 operating earnings are expected to set a record of $64.41, a 17.8% increase. As-reported earnings are also expected to post a new record for the year at $55.70, a 14.3% gain. The S&P 500 is estimated to close the year at 1215, representing a 9.3% capital gain or 11.1% on a total return basis.
75% of reporting issues in the S&P 500 have outperformed their estimates and 83% have posted an increase from 2003. Broad sector gains were posted for the Industrials sector, with 33 of the 34 reported issues increasing their earnings. Both the Telecommunications and Utilities sectors however, have so far shown the weakest breadth of growth with only 4 of their combined 19 issues posting a gain.
Sales for the S&P 500 continue to grow, up 10% quarter-on-quarter, aided by the foreign exchange rates. The strongest increase was noted in Health Care with 16.7% and the weakest in Utilities with 2.4%. Operating margins are up 9.44% versus 8.48% quarter over quarter, reflecting the strengthening economy and gains in productivity.
Standard & Poor's
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