Summary
Fourth-quarter earnings season is winding down, as the retailers start to release their reports. The overall growth rate is set to land in the mid-teens range, which is above our forecast for 10%-12% growth. Yes, earnings typically beat expectations. But let’s take a closer look. There are three drivers to EPS growth: higher sales, a wider operating margin, and a reduced share count. A decline in shares outstanding, which is the result of corporate share buybacks, is the lowest-quality driver of EPS growth. Higher sales — as customers demand and pay for more products and services — is the highest quality, especially when those sales are driven by an increase in volume. (Fourth-quarter revenue growth has been about 5%, or about 250 basis points above U.S. GDP growth, which is healthy.) Margin management is in the middle. Consistently wider margins, quarter after quarter, are often a sign of a good management team, which should over time be able to grow revenues faster than it grows costs. That’s a bit of a tall order in periods of high inflation, which raises the Cost of Goods Sold, and of high interest rates, which result in higher financing costs. What’s more, there’s a cap to margins as they don’t rise indefinitely. (This is one of those statistics for which the conc
EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email news@emeatribune.com Follow our WhatsApp verified Channel
