The largest companies in the United States are achieving some of their strongest growth numbers since the “Great Recession” from 2007-2009.
Profits at S&P 500 companies surged an estimated 23.5 percent from April through June, the Wall Street Journal reported, citing data from Thomson Reuters. The jump in profits was more than two-and-a-half times the revenue growth in the same period.
“We are encouraged by the strength of the U.S. economy, including low unemployment and healthy housing demand,” Whirlpool Corp. Chief Financial Officer James Peters told the Journal last month.
A cut in the U.S. corporate tax rate from 35 percent to 21 percent has propelled a large amount of the rise in profits, though companies have tried to increase prices for goods to offset rising costs and possible tariffs.
Kraft Heinz Co. said it raised prices to balance foreign cost inflation and expensive trucking fees in the U.S.
United Technologies Corp. reported a 42 percent second-quarter profit growth but was forced to increase prices as costs climbed.
Companies are raising prices to offset an increase in demand, but businesses are encouraged to persevere through the risky decisions because of a strong economy and swelling economic growth.
The U.S. economy grew at a rate of 4.1 percent in the second quarter of 2018, its largest annual growth rate since 2014.
James Russell, vice president of Bahl & Gaynor, told the Journal that he anticipates earnings to rise even if revenue starts to decline.
“There is no question that the first and second quarters are seeing benefits from the tax package,” Russell said.
Bank of America Merrill Lynch analysts revealed that profits for individual businesses are 3 percent above Wall Street’s expectations, and the bank believes earnings per share for S&P 500 companies will rise above 20 percent this year.
Roughly 80 percent of S&P 500 companies have announced their profits for the second quarter. The energy, financial, and technology industries all reported massive gains in the quarter compared to results from 2017, and revenue for all S&P 500 companies increased 9.2 percent since last year.