Newspaper article THE JOURNAL RECORD

Stock Analysts Foresee Rebound in Corporate Profits

Newspaper article THE JOURNAL RECORD

Stock Analysts Foresee Rebound in Corporate Profits

Article excerpt

When Wall Street analysts write their scripts for recovery from the recession, most assign a starring role to corporate earnings. The profits of publicly held com- panies have been in a slump for nearly two years _

twice as long as the officially rec- ognized decline in overall economic output. Now, some& stock-market& investors seem to be placing their bets that earnings are at or close to a turning point. In last week's trading, they engaged in spirited bidding for stocks in cyclical industries like auto and paper manufactur- ing that have long been closely identified with the ups and downs of the business cycle. That seemed to signal a change of heart from early in the year, when such "smokestack" industrials lagged notably behind the sharp rally taking place in the market as a whole. "The 1990-91 recession is in the home stretch," maintained Erich Heinemann, chief economist at Ladenburg, Thalmann & Co. "Granted, consumers are on the sidelines. They may remain so for quite a while. Nevertheless, profit margins are likely to widen dramatically in the months just ahead as business volume and productivity rebound." Added Stephen Quickel, editor of the New York-based advisory letter U.S. Investment Report: "From here on, rebounding earnings will be the market's driving force. "The Federal Reserve has lowered interest rates. Now the economy must respond. By the third and fourth quarters, profits should be rebounding across the board." Wright Investors' Service in Bridgeport, Conn., calculates that corporate profits have fallen for seven consecutive quarters, from mid-1989 through the first three months of this year. Wright analysts see reasons to doubt the chances for any immediate turnaround. "Not only has the U. …

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