Sales growth the big surprise on Wall Street

Companies have found a new way to surprise analysts: They're selling more stuff.

Companies have found a new way to surprise analysts: They're selling more stuff.

Three out of four companies in the S&P index that have reported earnings this quarter have beat sales predictions by Wall Street analysts. And some companies aren't just merely squeaking in ahead of expectations. Fifteen percent of companies that beat estimates did so by at least 10 percent, according to Standard & Poor's.

More companies are beating sales predictions than at any other point since the recession ended in June 2009. This surprise comes on top of eight straight quarters of beating analysts' profit forecasts.

Analysts often underestimate profits when companies cut costs in ways that aren't easy to gauge from the outside. But those same experts rarely make mistakes with revenue projections. That's because many analysts have developed highly-reliable, fine-tuned systems to estimate sales, ranging from counting cars in a parking lot to complex mathematical models.

Why were so many experts wrong?

Analysts were far too worried that high gas prices, uprisings in the Middle East and Libya and fallout from the earthquake in Japan would result in lower business and consumer spending. Instead, consumers are spending more on everything from airfare to oranges.

Positive sales surprises indicate that consumers and businesses are absorbing things like higher food and gas prices — and still spending on non-necessities. So far this quarter, two out of every three companies that chase consumers' discretionary spending on things like dresses, motorcycles and even trips to Las Vegas brought in more revenue than investors expected. All told, higher sales could signal a healthier economic recovery than investors believed.

"It appears that all of the caution was unfounded," said Jonathan Golub, the chief U.S. strategist at UBS.

The revenue surprises are one reason why the S&P index has risen 2.8 percent to 1,363.61 so far in the second quarter and 8.4 percent for the year to date. The S&P index has risen by an average of 9.6 percent per year over the last 25 years, according to FactSet. A gain of 8 percent in just four months means that the S&P could top last year's 12.8 percent gain if it continues to rise.

Many of the revenue surprises came among industrial, materials, and technology companies that produce everything from bulldozers to cellphones. These three groups typically do well in an economic expansion as businesses ramp up production — another sign of a healthier recovery. Eighteen of the 21 industrial companies in the S&P 500 that have released earnings beat sales estimates by nearly 5 percent, according to UBS.

Some companies, like Apple Inc., would have bested sales estimates by even more if it weren't for production delays. The company brought in $1.3 billion more in sales than the $23.4 billion analysts were expecting after record sales of its new line of iPads. "We sold every iPad 2 that we could make," Peter Oppenheimer, the company's chief financial officer, said during the company's earnings call.

Other companies said that higher revenues are leading them to expand. On Tuesday, Inc. said that it generated $300 million more in sales than the $9.5 billion analysts predicted. The company missed profit expectations because it is spending money on warehouses and upgrading its technology. ""We're just seeing tremendous growth, and because of that we're having to invest in a lot of capacity," said Thomas Szkutak, Amazon's chief financial officer told analysts.

Whether or not those gains will last remains to be seen. So far, new payroll tax breaks could be masking the pain at gas and food checkouts for consumers. The one-year 2 percentage-points break means an average of $695 more in take-home pay for some 159 million workers.

But more price increases are coming. Household products giant Procter & Gamble said Thursday that it plans to raise prices this summer on items like Head & Shoulders shampoo, Iams pet food and Cascade dishwashing detergent. McDonald's Corp., too, is raising prices because of higher food costs. These increases follow others that came in the second half of 2010, the first post-recession rise in prices.

Companies hope that consumers remain confident enough in the economy to absorb these increases and still spend on non-necessities. If they don't, that could make these sales surprises — which have led to profit margins near some of the highest levels in two decades — are a short-term phenomenon.

In Other News

fake money

Keywords clouds text link

 máy sấy   thịt bò mỹ  thành lập doanh nghiệp
Visunhomegương trang trí  nội thất  cửa kính cường lực   lắp camera Song Phát thiết kế nhà 

Our PBN System:  thiết kế nhà xưởng thiết kế nội thất thiết kế nhà tem chống giả ban nhạ  ốp lưngGiường ngủ triệu gia  Ku bet ku casino buy fake money máy sấy buồn sấy lạnh

mặt nạ  mặt nạ ngủ  Mặt nạ môi mặt nạ bùn mặt nạ kem mặt nạ bột mặt nạ tẩy tế bào chết  mặt nạ đất sét mặt nạ giấy mặt nạ dưỡng mặt nạ đắp mặt  mặt nạ trị mụn
mặt nạ tế bào gốc mặt nạ trị nám tem chống giả  công ty tổ chức sự kiện tổ chức sự kiện
Ku bet ku casino
Sâm tươi hàn quốc trần thạch cao trần thạch cao đẹp

suất ăn công nghiệpcung cấp suất ăn công nghiệp

© 2020 US News. All Rights Reserved.