Newspaper article The Christian Science Monitor

Company Earnings Follow Strong Economic Expansion but Some Worry These Profits Represent a Peak

Newspaper article The Christian Science Monitor

Company Earnings Follow Strong Economic Expansion but Some Worry These Profits Represent a Peak

Article excerpt

EARNINGS and dividend reports are now pouring in from corporate America. And they are looking good, thanks to an expanding economy, higher consumer confidence, and an economic upturn in Europe that has helped export-oriented United States companies.

Barring a sharp slowdown in the economy, triggered by further increases in short-term interest rates, earnings and dividends are expected to increase throughout the remainder of 1994, experts say. Still, the Federal Reserve Board's effort to boost rates to slow the economy is expected to hold down the pace of gains later this year, the experts add.

"Profits are quite strong and they are the key to dividend gains," says Joseph Tigue, managing editor of "The Outlook," an investment news letter published by Standard & Poor's Corporation. "We're now expecting an increase in earnings gains {for 1994} on the S&P 500 of about 30 percent, before nonrecurring charges. That compares to gains last year of about 15 percent," Mr. Tigue says. Nonrecurring charges are one-time losses or other write-offs taken against net income.

Dividend's are also expected to be up throughout this year, Tigue says. S&P analysts say that dividends on the S&P 500 should rise about 7.5 percent during 1994, the best year for dividend gains since 1990, when they rose about 11.5 percent. First quarter dividends on the S&P 500 rose around 4.3 percent over the first quarter of 1993, Tigue says.

Many of the companies reporting in last week showed gains well above earlier expectations from stock analysts. High-tech companies fared particularly well. The upbeat news on earnings and dividends helped drive stock indexes higher in the latter part of last week. Thus, the Dow Jones industrial average shot up 53.83 points on Thursday. But the strong corporate earnings of just one company - IBM - accounted for about a fourth of the Dow's gain that day. For the week ending April 22, the Dow closed down at 3,648.68 points.

Among companies ringing in with solid earnings-dividend reports in recent days: Chrysler Corporation, General Dynamics Corporation, Mattel Inc., Pfizer Inc. …

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