Optimistic CEO Upside Surprises

It turns out its not just the wealthy who are feeling more optimistic. According to a Bloomberg analysis, more companies are raising earnings forecasts versus those who are cutting them. The gap between the two is as large as its been since Bloomberg began tracking the data.

More U.S. executives than ever are increasing earnings forecasts compared with those lowering them, helped by almost $2 trillion of Federal Reserve spending and a recovery in the global economy.

EBay, UPS, and 196 other companies raised profit estimates above analysts’ projections versus 130 firms that cut them. This is the biggest gap since Bloomberg began tracking the data in 1999.

Companies are raising the outlook for U.S. profits at the same time the Fed is trying to prevent deflation and reduce unemployment by purchasing an additional $600 billion in Treasuries. The last time executives were this optimistic, stocks climbed 39% over the next 3 1/2 years, data compiled by Bloomberg show . . .

Rising international demand for everything from transportation services to tobacco and power tools is helping drive profits at companies such as UPS, Philip Morris International Inc. and Danaher Corp. While forecasts for U.S. gross domestic product in 2011 have fallen to 2.4 percent from 2.9 percent in July, the biggest emerging markets are expected to expand at least twice as fast, based on economist estimates and International Monetary Fund forecasts compiled by Bloomberg.”

Adding to the improved earnings expectations: Consumer borrowing in the U.S. rose in September by the most in two years. Driven by non-revolving credit (i.e., college loans and auto financing).

In fact, the Morgan Stanley Cyclical Index — those businesses most tied to the economy — is up 27% since July 2 versus 20% for the broader S&P500.

The economy continues to slowly improve, much to the consternation of the recessionistas . . .

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Source:
CEOs Most Optimistic on U.S. Profits in Bull Signal
Lynn Thomasson and Whitney Kisling
Bloomberg, Nov. 8 2010
http://noir.bloomberg.com/apps/news?pid=20601109&sid=azIjiOrQyWpw&

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