By James Saft
(Reuters) – Corporate earnings and revenues can’t, as they are doing this earnings season, diverge forever.
Just about halfway through the U.S. third-quarter corporate reporting season and we find that 59 percent of S&P 500 companies have beaten their earnings estimates, down a bit from last quarter but still an upbeat number.
And yet about 60 percent have missed their sales targets, meaning that corporate America is somehow extracting more profit than promised despite bringing less money into the tills than expected.
That’s admirable, but perhaps a bit disturbingly close to magical.
On many readings, all is rosy in the land of equities. Not only does the market have crucial support from central banks bent on forcing money into risk assets (and hoping some of the profits get spent), earnings are at record highs and the amount investors will pay for a share of those earnings is going up.
Analysts are forecasting fourth-quarter earnings to grow at a near 9 percent clip, down from the 17 percent they were penciling in earlier but still enough to take the earnings of the S&P 500 to almost $27 per share, in what would be yet another record.