The growning gap between income and profit amoung S&P 500 companies suggests new efficeincies and investment bargains.
S&P 500’s Worst Writedowns Signal Rally as Gap Widens
Dec. 15 — Just when U.S. companies are about to report their biggest writedowns, the losses may be the strongest signal yet that it’s time to buy stocks.
Companies in the Standard & Poor’s 500 Index are marking down assets at the fastest rate in six years, leaving operating profits 46 percent higher than net income in the third quarter, a level last seen in 2003 when the previous bull market began. Starbucks Corp., Johnson Controls Inc. and Washington Post Co. reported profits before restructuring and layoff expenses for the period ended in September that were twice their bottom line.
Earnings at U.S. companies have dropped for five straight quarters, matching the longest streak on record, as the deepest financial crisis since the Great Depression turned 2008 into the worst year for the S&P 500 since 1931, according to data compiled by Bloomberg. The ballooning gap between net income and operating profit suggests companies are getting rid of their weakest businesses, setting the stage for a recovery in stocks next year.
Filed under: Uncategorized | Tagged: net income, operating profit, S&P 500, writedowns
