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US: Positive revenue growth just around the corner
Tue, Oct 27 2009, 09:54 GMT
by Economic and Strategy Team
The current earnings season is nothing short of stellar: so far 81% of the first 199 S&P 500 companies to report earnings came in above expectations on their thirdquarter 2009 results. But this time around, we are also interested by the top line. We have previously said it was a good thing that U.S. companies were busy cutting costs. This made them more productive. But cost-cutting alone will not produce a sustainable economic recovery.
Top-line growth is needed if employment is to grow down the road. Companies are now lean. Profit margins of nonfinancial companies are now at 10%, which is pretty high for the end of a recession. Any uptick in sales will give bottom lines a big boost. The blended Q3 revenue growth rate (combines actual numbers for companies that have reported and estimates for companies that have yet to report) for the S&P 500 is −10.2%. But so far in the quarter, quarterly revenues have declined only 2.5%. According to the consensus, positive revenue growth is just around the corner: Q4 sales for the S&P 500 are expected to be up 4.7%.Further down the road, revenue growth is expected to remain in positive territory.
It should be noted that the average expected quarterly revenue growth between Q4-09 and 2011 is seen at 6.6%. This is lower than the 2005-08 average of 9.6%.
This is consistent with our economic scenario which sees upcoming economic growth below last cycle’s trend.
Published on Tue, Oct 27 2009, 09:56 GMT
National Bank of Canada
| 1100 University, 11th floor Montreal (Québec) H3B 2G7
http://www.nbc.ca/ | info@nbc.ca
Legal disclaimer and risk disclosure
This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.Related reports
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