An unhooked phone dangles at a station on the floor of the New York Stock Exchange at the end of trading Tuesday. Stocks dipped as investors absorbed poor earnings reports among lingering doubts about economic strength.Chris Hondros/Getty Images
Investors might be disappointed with the latest earnings release from Apple Inc. , but the results nonetheless play into a pretty good start to the third quarter reporting season so far. With 16 per cent of companies within the S&P 500 having delivered results so far, earnings on a per-share basis are up 13.7 per cent, according to National Bank Financial. What's interesting is that sales also look good, rising 9.7 per cent.
"Note that so far the overall Q3 expansion in earnings is in large part explained from sales growth and not from profit margin expansion," said Marco Lettieri, an economist at National Bank Financial. "This is a change from previous quarters where profit margin expansion was at the forefront of strong earnings growth."
He pointed out that if the current trend persists, earnings for companies within the S&P 500 will hit record levels this quarter. That's a big if, though.
"The financial sector has been unable to generate any sales growth again this quarter," Mr. Lettieri said. "Anaemic growth in U.S. consumer credit accompanied by the fact that this sector will stop benefiting from improvements in their loan loss provision over the coming quarters spells trouble for this sector's earnings in 2012."
David Berman