Earnings season is winding down, with most major companies having reported on how they did in the third quarter. And the results have some interesting lessons for where the economy is going.
Of the 428 companies that have reported, according to FactSet, 70 percent have beaten analyst projections of their profitability. It is shaping up, as analysts had forecast, to be the first quarter in almost three years in which earnings declined. But it wasn’t quite the bloodbath that had been expected. Analysts had forecast a 3.1 percent decline in earnings when the quarter ended, yet so far it has dropped by only 0.1 percent.
But what’s particularly notable is how the good news on earnings came about. It’s not from higher sales. In fact, only 40 percent of the companies that have reported beat analyst forecasts on their revenues. In other words, corporate America found other ways to become more profitable in the third quarter, squeezing expenses such as worker salaries to improve their bottom line even when their top line wasn’t doing all that well.