September 20, 2021

Earnings Facing Uphill Battle In 2011

ces big business

2011 could be a shaky year for corporate profits with a significant impact being felt by a number of industries from labor and fuel costs. Image courtesy of CES.

This week, companies will start reporting earnings. Analysts expect reported gains to peak during this quarter, but start to plateau as companies face an uphill battle fighting unemployment and other business headwinds. It’s anticipated these things could take a heavy bite out of corporate profits.

Several industries may see some boost this year according to financial experts. Alcoa Inc. and Intel Corp. are two the market expects to see earnings from, with profits increasing for the final quarter of last year. The expected 9.8% boost in fourth quarter profits over the previous year’s same period helped juice the Dow Jones Industrial Average to a two and a half year high this month.

The good news may start to slow or even come to an end in the ongoing economic recovery as a number of industries such as construction, food, telecommunications and airlines continue to feel the pressure of shrinking profits. These industries have typically lagged behind and will face potentially significant cost increases with rising labor and fuel costs. An economic boost not foreseen would be needed to continue the momentum.

The biggest factor impacting company’s bottom lines and stalling a swifter economic recovery are unemployment rates. Steven Ricchiuto, Mizhuho Securities’ chief economist said, “The big decline in the jobless rate to 9.4% from 9.8% was due to a third consecutive decrease in the labor force, again not a sign that people are seeing their job prospects increase.”