Companies in the S&P 500 index reported a record collective net profit margin in the past 12 months of financial reports, analysis showed. It will soar even higher in the next two years, according to analysts’ current average estimates.
The level of profit that large corporations experienced in 2021 was unparalleled in American history, as consumers faced the worst price inflation the U.S. has seen in decades
Wall Street still expects a higher net profit margin for the S&P 500 this year, and the next two after that. On average, analysts predict that the S&P 500 index will produce a 13% net profit margin in 2022, according to FactSet, as they prepare for a wave of first-quarter numbers in the coming weeks, with similar projections for 2023 and 2024.
The smaller number of competitors is obvious in a number of industry sectors, where profits have grown slowly but steadily through the years. Big Tech, for example, is a small group of companies that dominate online commerce, which became even more essential during the COVID-19 pandemic. Other industries where this plays out include banking, oil and gas, and consumer staples.
Analysts reduced their overall earnings estimates for the first quarter by 0.7% as results rolled in during the first three months of the year, the first time that has happened since the COVID-19 pandemic struck in the second quarter of 2020, according to Butters. However, before the pandemic, it was common for Wall Street to bring down earnings estimates as analysts received guidance during the quarter, and the 0.
There are also industry-specific dynamics that are skewing the larger sample. Much of the boom in profit came from specific sectors that have not slowed down, including semiconductors and the five Big Tech companies, while any decline in other segments of the economy are likely to be papered over by expected gains for the energy sector as oil and gas prices rise during Russia’s invasion of Ukraine
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