(Bloomberg News) Standard & Poor's 500 Index companies are poised to report the biggest annual sales increase on record even as analysts reduce their estimate for growth in 2012.
Revenue in the benchmark gauge of American common equity will rise 11 percent to $1,052.42 a share in 2011, according to more than 10,000 forecasts compiled by Bloomberg. Projections for next year have been cut 1 percent in the past month after 43 percent of S&P 500 companies from 3M Co. to Amazon.com Inc. missed third-quarter forecasts, the most since 2009, data show.
Bulls say record gains in sales mean the economy is doing well enough for equities to rally after price-earnings ratios fell 20 percent below the six-decade average. To bears, the deceleration in growth shows the European debt crisis is curbing the economy and that stocks will resume declines after the S&P 500 posted its biggest monthly rally since 1991.
"Everybody thinks the world's coming to an end, but corporate America is doing great and it's a function of good sales," Eric Green, a Philadelphia-based fund manager at Penn Capital Management, which oversees about $6 billion, said in a telephone interview on Nov. 3. "It's not unusual that you get these short-term slowdowns during panicky markets. The sales estimates coming down is a good thing because it allows to companies to meet or beat more easily."
Stocks fell last week, with the S&P 500 losing 2.5 percent to 1,253.23, as Greece's reluctance to accept another bailout and a disagreement over boosting the International Monetary Fund's resources threatened Europe's efforts to halt its debt crisis. Federal Reserve officials cut their outlook on Nov. 2 for U.S. economic growth in 2012 and forecast that unemployment will average from 8.5 percent to 8.7 percent in the final three months of next year.
October's Rally
Last week's slump followed an 11 percent rally in October fueled by S&P 500 profits that have exceeded analyst estimates by an average of 4.6 percent, the 11th straight quarter of better-than-expected earnings, data compiled by Bloomberg show. The S&P 500 gained 0.4 percent to 1,258.67 as of 9:46 a.m. New York time.
While the Labor Department said Nov. 4 that U.S. unemployment was at least 9 percent for a seventh straight month, companies are poised to report their highest income and revenue ever. S&P 500 earnings rose 16 percent or more for seven straight quarters and American gross domestic product expanded by the most in a year between July and September.
Diverging Forecasts
The 11 percent gain in per-share sales that analysts project for 2011 follows a 4.9 percent advance in 2010 and a 9 percent decline in 2009, the biggest in data going back to 1993. The next-largest revenue increase on record was 10.7 percent in 2004, when it rallied 9 percent during the second year of a bull market. Analysts expect sales to climb 3.9 percent in 2012, according to data compiled by Bloomberg.
Forecasts for 2011 have climbed since the start of the year even as concern about Europe's debt crisis spurred economists to lower predictions for GDP. Analysts predicted on Jan. 3 that revenue would rise 6.1 percent. Forecasts for U.S. economic growth fell from 2.6 percent at the start of the year to 1.7 percent now, according to the median of 80 estimates in a Bloomberg survey.