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American Companies Wrest Big Earnings From Lower Revenue
Key Excerpts from Article on Website of Wall Street Journal
Posted: October 17th, 2010
http://online.wsj.com/article/SB1000142405274870452360457551...
U.S. companies are rebounding quickly from the recession and posting near-historic profits, the result of aggressively re-tooling their operations to cope with lower revenue and an uncertain outlook. An analysis by The Wall Street Journal found that companies in the Standard & Poor's 500-stock index posted second-quarter profits of $189 billion, up 38% from a year earlier and their sixth-highest quarterly total ever, without adjustment for inflation. For all U.S. companies, the Commerce Department estimates second-quarter after-tax profits rose to an annual rate of $1.208 trillion, up 3.9% from the first quarter and up 26.5% from a year earlier. That annual rate is the highest on record, though it doesn't account for inflation. As a percentage of national income, after-tax profits were the third-highest since 1947, surpassed only by two quarters in 2006, near the peak of the last economic expansion. The data indicate that big companies are recovering from the downturn faster and more strongly than the overall economy, helping send stock prices higher this year. To achieve that performance, companies laid off hundreds of thousands of workers, closed less-profitable units, shifted work to cheaper regions and streamlined processes. Despite the hefty profits, executives aren't expected to boost spending on new employees, products and equipment anytime soon. "We've focused on permanent changes that won't have to be undone as sales improve," said John Riccitiello, chief executive of Electronic Arts.
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