STREAMING NOW: Watch Now

Corporate America's big, fat profitable year

Corporate America caught fire in 2017, hauling in fatter profits than ever before.The lucrative year for big b...

Posted: Dec 22, 2017 5:25 PM
Updated: Dec 22, 2017 5:25 PM

Corporate America caught fire in 2017, hauling in fatter profits than ever before.

The lucrative year for big business, fueled by resurgent economic growth at home and abroad, helped spark a powerful stock market boom on Wall Street.

S&P 500 earnings per share are projected to have jumped by 9.5% in 2017, according to FactSet. That would be the fastest pace since 2011.

Even better, S&P 500 companies are expected to bring in record profit this year, according to S&P Dow Jones Indices.

"Profits are the story of the year. I believe this bull market has a little more gas left in it," said John Lynch, chief investment strategist at LPL Financial.

Companies could rake in even more money in 2018 thanks to an overhaul of the tax code that dramatically cuts what they owe Uncle Sam.

Yet 2017's profit growth wasn't really driven by Washington, nor was it all based on cutting costs. Strong sales show that the stellar performance was driven mostly by "good old home-cooking fundamentals: growth domestically and globally," Lynch said.

Consider that for the first time in three years, the U.S. economy grew at 3% for back-to-back quarters. Unemployment plunged to a 17-year low and confidence among consumers and businesses is roaring.

Related: Why now's not the time for expensive tax cuts

Tellingly, global companies enjoyed even better years. Companies that generate most of their sales outside the U.S. grew earnings twice as fast as those focused domestically, according to FactSet.

Clearly, companies cashed in on newfound economic strength in Europe and Latin America as well as relative stability in China. For the first time in years, virtually all major global economies are growing at the same time.

"During 2017, the global synchronized recovery turned into a global synchronized boom that is likely to continue in 2018," Ed Yardeni, president of investment advisory Yardeni Research, wrote in a report.

Another key: the U.S. dollar lost a lot of steam this year. A weaker greenback makes U.S. products cheaper for foreign buyers.

Against that backdrop, companies continued to refill their coffers. Non-financial U.S. companies are sitting on an estimated $1.9 trillion in cash, more than doubling their 2008 totals, according to Moody's.

Earnings are the engine that power stock prices, so clearly their steady ascent played a key role in Wall Street's blockbuster year. The market value of the S&P 500 surged by nearly $4 trillion in 2017.

Some of 2017's most fantastic winners like Boeing, Netflix and Caterpillar are enjoying rapid earnings growth right now.

Related: The year tech took a dark turn

Yet it's also fair to say that President Trump's promises to overhaul the tax code, cut regulation and ramp up infrastructure spending have helped unleash the animal spirits of the business world.

That excitement explains why the stock market has leaped ahead of corporate profits. The S&P 500 is up about 20% in 2017, double this year's projected profit growth.

That "rapid run" suggests most of the rally has been linked to expectations of policy changes, said Kristina Hooper, chief global market strategist at Invesco.

Looking ahead, both corporate profits and the stock market are expected to keep going up. The tax overhaul could provide a significant boost to the bull market, which at nearly nine years old is the second-longest in history.

"The stars have never been more aligned for equities," said Joe Quinlan, market strategist at Bank of America's U.S. Trust division.

One potential obstacle: By injecting a healthy economy with unneeded tax cuts for businesses, inflation may rear its ugly head and force the Federal Reserve to speed up interest rate hikes.

"The biggest risk to me is monetary policy gets hawkish and rattles capital markets," said Hooper.

Related: Will companies spend tax savings to create jobs?

For workers, the real question is whether companies will use their tax windfall to share the winnings with employees and expand their businesses.

After Congress passed the tax legislation, AT&T and Comcast unveiled plans to give employees a one-time $1,000 bonus. (AT&T is trying to buy CNN owner Time Warner). Wells Fargo, one of the biggest expected winners from the tax plan, announced an 11% boost to its minimum wage.

"For the first day, I thought that was impressive. It makes me hopeful about the potential for the tax bill" to boost business spending, said Hooper.

Yet those employee rewards represent just a fraction of the tax bonanza for major companies. And it remains to be seen how many more will decide to share the wealth with workers.

It's a big deal because wage growth has been disappointing for years, leaving many Americans feeling left out of the recovery and lifting the country's wealth inequality gap to record levels.

"If the wealth and inequality gap grows, it negatively impacts all of corporate America. That is really the vexing issue," said Hooper.

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 65436

Reported Deaths: 1848
CountyConfirmedDeaths
Hinds5487116
DeSoto352328
Madison238763
Harrison237835
Rankin222032
Jackson220142
Jones184258
Forrest172155
Washington158237
Lauderdale139090
Lee133232
Neshoba127891
Lamar118414
Bolivar116333
Oktibbeha109037
Lowndes103935
Warren100731
Scott98720
Panola98012
Sunflower96723
Copiah94128
Lafayette93714
Leflore89362
Pike87734
Holmes86348
Grenada83021
Yazoo80712
Pontotoc7918
Lincoln79041
Leake77925
Simpson77930
Wayne74921
Monroe74751
Coahoma69711
Tate69227
Marion63819
Marshall6389
Covington60713
Winston60415
Adams60225
Union56215
George5484
Newton53511
Pearl River52037
Attala51324
Walthall48919
Noxubee44411
Chickasaw44119
Tallahatchie40710
Calhoun4009
Claiborne39913
Smith39413
Prentiss3869
Alcorn3825
Clay38214
Jasper3819
Hancock36314
Tishomingo3505
Itawamba33710
Tippah32513
Clarke32425
Tunica3176
Montgomery3073
Yalobusha30710
Lawrence3067
Humphreys28211
Carroll25411
Quitman2401
Greene23111
Kemper22815
Jefferson Davis2266
Amite2206
Perry2207
Webster21612
Jefferson1946
Wilkinson19413
Sharkey1903
Stone1633
Benton1330
Choctaw1304
Franklin1162
Issaquena251
Unassigned00

Alabama Coronavirus Cases

Confirmed Cases: 94827

Reported Deaths: 1674
CountyConfirmedDeaths
Jefferson12486232
Mobile9420204
Montgomery6449148
Madison516130
Tuscaloosa405769
Baldwin338023
Unassigned319060
Shelby316432
Marshall306034
Lee258844
Morgan229517
Etowah204128
DeKalb174513
Calhoun167213
Elmore167238
Walker149864
Houston134812
Dallas130523
St. Clair128915
Russell12772
Limestone126113
Franklin123820
Cullman118912
Colbert114113
Lauderdale112315
Autauga105021
Escambia104416
Talladega96713
Jackson9244
Tallapoosa84179
Chambers83538
Dale80223
Blount7593
Butler75635
Chilton7456
Coffee7365
Covington71620
Pike6877
Lowndes56724
Barbour5655
Marion56224
Marengo53614
Clarke4949
Hale46426
Bullock45011
Winston44011
Perry4364
Wilcox41410
Bibb4134
Monroe4084
Randolph39410
Conecuh37810
Pickens3779
Sumter36018
Lawrence3321
Macon32013
Washington32012
Crenshaw3123
Choctaw27712
Cherokee2587
Greene24911
Henry2493
Geneva2480
Clay2375
Lamar2122
Fayette1835
Cleburne1251
Coosa1012
Out of AL00
Tupelo
Clear
92° wxIcon
Hi: 92° Lo: 70°
Feels Like: 94°
Columbus
Clear
92° wxIcon
Hi: 92° Lo: 71°
Feels Like: 97°
Oxford
Clear
90° wxIcon
Hi: 89° Lo: 67°
Feels Like: 92°
Starkville
Clear
88° wxIcon
Hi: 89° Lo: 66°
Feels Like: 88°
WTVA Radar
WTVA Temperatures
WTVA Severe Weather