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US-Corporate Profits (- Q3/2016)

US-Corporate Profits
(- Q3/2016)

A key measure of after-tax earnings across U.S. corporations rose 5.2% in the third quarter from a year earlier, the Commerce Department reported Tuesday, 29th Nov 2016. That was the first annual increase since late 2014 and the strongest...

Corporate Profits After Tax vs. S&P 500 (2007 - Q3/2016)

...year-over-year growth since the fourth quarter of 2012. Tuesday's Commerce Department report (29th Nov. 2016) also showed that gross domestic product, a broad measure of the goods and services produced across the economy, expanded at an inflation- and seasonally adjusted annual rate of 3.2% in the third quarter, the strongest growth in two years.

That was up from last month’s estimate that output rose at a 2.9% pace in the third quarter and beat economists’ expectations for a revision up to 3% growth.

Corporate profits have been pressured in recent years by various forces including weak global growth, a strong dollar that damps demand for U.S. exports, and slumping commodity prices that battered the energy and agriculture sectors.

But business earnings have shown signs of stabilization this year as some of those headwinds faded. The Commerce Department said after-tax corporate profits, without inventory valuation or capital consumption adjustments, rose 3.5% in the third quarter from the prior period, their third consecutive quarterly increase.

With nearly all S&P 500 index companies reporting results, profits were set to rise 4.2% from last year’s third quarter. Sales were expected to increase 2.6%. The figures reflect actual earnings—adjusted to exclude write-downs, restructurings and other items considered unusual - for companies that have reported and analyst expectations for others. Excluding the hard-hit energy sector, earnings would be up 7.9%

Consumer spending, which accounts for more than two-thirds of U.S. economic output, rose at a 2.8% annual rate in the third quarter, according to Tuesday’s report. That was up from an earlier estimate of 2.1% growth, though still a slowdown from the second quarter’s robust 4.3% growth rate for household outlays.