Corporate earnings have been on a roll for nearly three years now, but there are signs that the string of good fortune may be coming to an end. The profit margin for the S&P 500 companies, as the Wall Street Journal reported yesterday, dropped from 8.95 percent in the second quarter of 2011 to 8.23 percent so far for companies that have reported profits for the fourth quarter. That's the biggest drop we've seen since the onset of the financial crisis.
We're also seeing fewer companies meet their earnings estimates. As you probably know, more than half of all corporations exceed the consensus estimates that Wall Street analysts issue for their earnings report. This year, 60 percent of the S&P 500 firms are beating the analysts' projections - which may seem like a lot, but it's the lowest that number has been since 2008.
That's not to deny that we've come a long way since the financial crisis. The S&P 500 is on track to earn $24.20 a share this quarter; back in the fourth quarter of 2008, it bottomed out at $4.42 a share.
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