Recession
Many U.S. companies are reporting better-than-expected earnings for the most recent fiscal quarter, but once again the profits generally stem from anything but an economic turnaround.
Cost-cutting, restructuring, improved technology, focused product lines, low interest rates, cheap raw materials - steps taken to combat the slow economy of the past two years are paying off for many companies.
"They are adjusting to a period of lower growth," said Wayne Stevens, president of Duff & Phelps Investment Research Co. in Chicago. "Price increases are difficult to come by. Volume expansion is difficult. You really have to do it by cost-cutting."
Economists say it is too early in the earnings season to derive conclusions about the third quarter, and they caution that companies with negative performances may decide to wait before releasing data.
According to IBES Inc., which tracks corporate profits, only 445 of 3,200 public U.S. companies had reported third-quarter earnings as of yesterday. Of those, however, 70 percent showed improvement over last year's third quarter, 22 percent were below last year and the rest were the same or unavailable.
IBES also said just over half the companies reporting - 230, or 52 percent - posted earnings above the expectations of Wall Street analysts. Thirty-three percent were below expectations, and the rest were in line.
Among sectors above expectations were financial services, especially brokerage houses. Big Wall Street firms, including Merrill Lynch & Co. and PaineWebber Inc., have reported surprisingly large earnings during what could be a record year for the securities industry.
Where other industries - including Wall Street - have retrenched, big technology companies are still struggling.
IBM, the No. 1 computer company, yesterday reported a loss of $2.8 billion in the third quarter, demonstrating it still hasn't coped with the economic slowdown or a price war in personal computers. No. 2 Digital Equipment Corp.
Cost-cutting, restructuring, improved technology, focused product lines, low interest rates, cheap raw materials - steps taken to combat the slow economy of the past two years are paying off for many companies.
"They are adjusting to a period of lower growth," said Wayne Stevens, president of Duff & Phelps Investment Research Co. in Chicago. "Price increases are difficult to come by. Volume expansion is difficult. You really have to do it by cost-cutting."
Economists say it is too early in the earnings season to derive conclusions about the third quarter, and they caution that companies with negative performances may decide to wait before releasing data.
According to IBES Inc., which tracks corporate profits, only 445 of 3,200 public U.S. companies had reported third-quarter earnings as of yesterday. Of those, however, 70 percent showed improvement over last year's third quarter, 22 percent were below last year and the rest were the same or unavailable.
IBES also said just over half the companies reporting - 230, or 52 percent - posted earnings above the expectations of Wall Street analysts. Thirty-three percent were below expectations, and the rest were in line.
Among sectors above expectations were financial services, especially brokerage houses. Big Wall Street firms, including Merrill Lynch & Co. and PaineWebber Inc., have reported surprisingly large earnings during what could be a record year for the securities industry.
Where other industries - including Wall Street - have retrenched, big technology companies are still struggling.
IBM, the No. 1 computer company, yesterday reported a loss of $2.8 billion in the third quarter, demonstrating it still hasn't coped with the economic slowdown or a price war in personal computers. No. 2 Digital Equipment Corp.