Arrow-right Camera
The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Earnings growth on decline

Associated Press

NEW YORK – With second-quarter earnings season just days away, it looks like the largest U.S. companies might break a notable winning streak – 12 straight quarters of double-digit earnings growth.

So far, there have been twice as many companies in the Standard & Poor’s 500 warning that they’ll miss second-quarter earnings targets as there are companies saying they’ll beat expectations.

That doesn’t mean earnings will be a stream of disappointments and a harbinger of economic bad news. Analysts predict double-digit growth in the third and fourth quarters. And S&P predicts record earnings for 2005.

Still, the torrid growth can’t last.

After the 2001-02 recession, earnings growth numbers looked great because they were compared to results from a weak economy. It’s easy to raise depressed earnings by 15 percent or 20 percent, but much harder to lift a robust number by the same amount.

The consensus estimate is that earnings will grow 7.1 percent for this year’s second quarter, compared to a stellar 25.3 percent in 2004’s second quarter.

Whatever happens, the good times over the past two years have given companies a cushion. According to Howard Silverblatt, equity market analyst at Standard & Poor’s, S&P 500 companies have the largest cash reserve in the history of the index.