U.S. Companies Post Profit Growth Not Seen in Six Years

America’s largest companies are on pace to post two consecutive quarters of double-digit profit growth for the first time since 2011, helped by years of cost-cutting, a weaker dollar and stronger consumer spending. Earnings at S&P 500 companies are expected to rise 11% in the second quarter, according to data from Thomson Reuters, following a 15% increase in the first quarter. Close to 60% of the firms in the index have reported second-quarter results so far. Corporate America’s strong earnings performance comes as several policy initiatives that were expected to help boost companies’ bottom line—corporate-tax cuts and increased government spending on infrastructure—have been sidetracked amid political infighting in Washington, D.C., which culminated with the recent failure of the health-law bill. Even as activity inside the Beltway bogged down, the markets have been on an almost nonstop rally since the election. The S&P 500 is up 16% since early November and 10% this year. “You could argue that the stock-market investor overestimated Trump but underestimated earnings,” said Christopher Probyn, chief economist for State Street Global Advisors. The second-quarter profit gains are spread across industries from Wall Street banks to Detroit’s car factories to Silicon Valley’s software labs. Earnings are expected to decline only in the utilities sector, according to data from Thomson Reuters. ​ Several factors are at work, analysts and economists say. A weaker dollar has made it easier to sell U.S.-made goods overseas and has kept borrowing costs low. U.S. wages have improved enough to help bolster consumer spending without raising employer labor costs so much to dent the bottom line. Companies also continue to reap the fruits of their recent zeal for cutting costs, Mr. Probyn said. “We underestimated some of the cost-cutting and restructuring that has gone on within the various industries; that has permitted earnings to keep doing well.” Sales, too, rose in the quarter, by an expected 5%, the second-biggest increase in more than five years, according to data from Thomson Reuters. The figures reflect actual results for about half the S&P 500 index, and analysts’ estimates for those that had yet to report results as of Friday. On Friday, the Commerce Department reported that gross domestic product rose at a 2.6% rate in the second quarter, up from 1.2% in the first quarter.

And the economy continues to roar on in this new Trump era..  To read the rest of this article from the Wall Street Journal, click on the text above.

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