Bottles of Coca-Cola are seen at the Swire Coca-Cola facility in Draper, Utah.GEORGE FREY/Reuters
As U.S. politicians bicker over how to stop the government's red ink, Corporate America keeps moving further into the black.
Once again, the largest U.S. companies are posting big profits, making it likely that this will be the tenth consecutive quarter of solid earnings growth. A large proportion of the S&P 500 have already reported this earnings season, and the numbers are good.
Global growth is driving this success. U.S. multinationals are benefiting from branching out into emerging economies such as China and India.
"Despite some disappointing results at a few banks, the earnings season is shaping up as another one full of positive surprises," Ed Yardeni, president of Yardeni Research, wrote in a note to clients. "That's impressive, given the subpar performance of the U.S. economic recovery."
Mr. Yardeni is one of the many who point to the benefits of globalization. S&P 500 firms "are finding plenty of revenues and earnings in their overseas operations," he said. "The world is full of challenges, but it is full of opportunities too, and U.S. corporations are finding them."
Yet because overseas profits are driving the performance, there are questions about how many jobs American companies will add at home. The unemployment rate south of the border has started to tick higher again, and that means U.S. consumers will continue to be strapped for cash.
Corporations, on the other hand, keep raking in the money and stashing it in their banks. Apple Inc. alone is sitting on $76-billion (U.S.) in cash and short-term investments.
Still, some companies continue to struggle, particularly those with direct exposure to the U.S. consumer. Unlike manufacturing giant General Electric Co., which benefits from selling to large companies, Whirlpool Corp. just posted a quarterly loss. Retail customers have stopped buying full appliance sets and instead opting for one-off pieces. That trend matches the weak consumption numbers south of the border, which have only grown by 1 per cent.
On that front, there doesn't appear to be much hope in the near future. Capital Economics predicts consumers will continue to hold back on discretionary spending until at least the second half of 2012.
But if there's one thing U.S. consumers are willing to spend money on, it's Apple products. The tech giant posted an astronomical profit of $7.3-billion, boosted by strong iPhone and iPad sales.
That strength was seen throughout the tech sector. The earnings growth stretched from Microsoft Corp. to IBM to Intel Corp., proving that the digital economy continues to dominate Wall Street.
Tim Kiladze