Profit reports for the first quarter are becoming available and investors are hopeful for improvements due to heavy cost-cutting efforts. In fact, compared to last year’s results, it won’t take much for companies to post better numbers. In addition to streamlined operations, companies got support from heavy government stimulus spending and record-low interest rates. Investors will be looking for companies to sustain improvements without government assistance going forward.
Stu Schweitzer, global markets strategist at J.P. Morgan’s Private Bank in New York mentioned that the forecasts that companies provide often are far more important than the earnings they report because investors are paying for stocks to get a slice of a company’s future profits.
Recently, the Standard & Poor’s 500 Index rose to an 18-month high on expectations that companies are getting stronger. According to analysts polled by Thomson Reuters, estimated first-quarter earnings growth rate for companies that make up the S&P 500 index is 37 percent.
Investors are optimistic that the coming quarters will show stronger revenue and higher profits due to the fact that the government reported the economy added jobs in March at the fastest pace in three years.
According to Tim Speiss, chairman of the personal wealth advisers practice at Eisner LLP in New York, the pace of recovery in earnings all comes down to jobs, because without gains in employment consumers won’t spend, and that means companies will find it hard to keep improving their bottom line.