U.S Q1 Profits to Rise-First Call
John:
Well looks like things aren't that gloomy after all,inflated expectations of analysts notwithstanding.
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U.S. 1st-Qtr Profits to Rise, Helped by Consumer Spending
New York, March 25 (Bloomberg) -- U.S. companies' first- quarter profits are forecast to rise 6.4 percent, their biggest gain since the last three months of 1997.
Consumer spending is fueling the profit surge, helping companies ranging from General Motors Corp. and Wal-Mart Stores Inc. to Apple Computer Inc. and McDonald's Corp., according to analysts surveyed by First Call Corp. ''The story is the consumer, who propelled strong earnings in the recent past and still has his wallet wide open,'' said Joe Cooper, First Call's senior research analyst.
Technology companies are expected to lead the way, with a 28 percent earnings rise, according to First Call. Companies such as Cisco Systems Inc. and Microsoft Corp. are boosting earnings by building the infrastructure or making software for the Internet and electronic commerce. Demand for their products is rising as more companies do business on line and link their global offices through computer networks.
Still, profit gains will be tempered by declines for oil- service companies and sluggish results from multinationals such as Coca-Cola Co., one of many companies with declining sales in key South American and Asian markets.
Forecasts for the first quarter have been receding as the year progressed. In January, analysts expected first-quarter corporate earnings to rise 9.5 percent, according to First Call.
The one-third reduction in expectations stems in part from continuing pressure on profits from weak overseas economies. There's also concern that rising wages will crimp profits because corporations have little ability to raise prices. ''Company profits are being squeezed by rising wages and, with low inflation, there's little ability for companies to pass on the cost of higher wages,'' said Richard Bernstein, chief quantitative strategist at Merrill Lynch & Co.
Technology
With a few exceptions, the boom for the high-tech industry is still on. ''Earnings will probably be good for most technology companies,'' said Ned Riley Jr., chief investment officer at BankBoston. ''But expectations were unrealistic.''
Microsoft, the world's biggest software maker, is expected to earn 63 cents a share, up from 55 cents a year earlier. Cisco, the biggest maker of computer networking equipment, is expected to earn 37 cents, up from 31 cents. Intel Corp., whose processors are in 75 percent of the personal computers sold today, is expected to earn $1.10, up from 81 cents.
PC makers may be in for a rocky period, analysts say, as shipments are expected to fall some 15 percent in the quarter.
Compaq Computer Corp. and Dell Computer Corp. are both expected to report strong quarterly profit gains, but less than analysts had initially anticipated. Apple Computer Inc. is expected to have a healthy gain of 36 percent, with earnings of 57 cents a share, up from 42 cents, thanks to strong sales of its multicolored iMacs and G3 computers.
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