Investment Management

PROFITS, PROFITS AND MORE PROFITS….

In the second quarter corporate pre-tax income grew 7.7% year over year, the most since 2014 and the seventh consecutive gain according to information released from the Commerce Department. Company spending on equipment, structures and intellectual property rose 8.5%. Goldman Sachs Group has estimated that companies in the S&P 500 will authorize $1 trillion in stock buybacks in 2018 – a 46% jump over 2017. Lower taxes, as provided by the recent corporate tax cut, certainly aided and abetted these results. But the “bottom line” surge so far this year has happened not only because of the tax cuts. Corporate America is doing business and doing it well. Credit Suisse, the large Swiss bank, estimates that lower tax levies added 8 percent to company earnings per share (EPS) in Q2. With trend EPS of +25.5% in the second quarter, if one strips out the tax fillip, that leaves a 17.5% increase just because of business. As Larry David (of Seinfeld fame) would say…”that’s pretty, pretty good”.