U.S. Corporate Profit Growth Decelerating

Chad Hudson reports that one of the more bullish indicators for the U.S. economy, the strong corporate profits, are becoming somewhat less bullish, though still not directly bearish.

"Over the past two weeks, analysts have lowered their estimates for fourth quarter earnings growth. Analysts now forecast earnings for the S&P 500 to have increased 9.1% last quarter compared to 10% growth expected on January 1. This would mark the first quarter since the second quarter of 2003 that earnings failed to grow at a double-digit rate. If companies end up exceeding current estimates and post double-digit gains, it would be 14 consecutive quarter of double-digit earnings growth and beat the previous record of 13 quarters set between the fourth quarter 1992 and the fourth quarter 1995. The financial sector is the major driver for S&P 500 earnings for the fourth quarter. Financial earnings are expected to have grown 34% last quarter. If the financial sector is excluded, the rest of the S&P 500 is expected to have increased earnings by 1.9%. Earnings growth for financial companies are expected to slow to single digits for 2007 and the expected earnings growth for the S&P 500 is similarly muted. "