These 3 Charts Show That Wall Street Is Unbelievably Optimistic About Profit Margins

Overall, Wall Street’s strategists are bullish on stocks for 2013 for various reasons.

One reason worth taking a second look at is expanding corporate profit margins, which are already at historic highs.

A slew of experts like GMO’s Jeremy Grantham, SocGen’s Albert Edwards, LPL Financial’s Jeff Kleintop, and John Hussman think these margins are unsustainable.

But the equity analysts and the companies they cover disagree.

Here’s a chart from Goldman’s David Kostin showing the analysts’ forecast for S&P 500 margins next year:

profit margins

Photo: Goldman Sachs

According to Morgan Stanley’s Adam Parker, more companies than ever believe their margins are going up:

profit margins

Photo: Morgan Stanley

In a recent note, BMO’s Brian Belski shared ths chart showing a secular uptrend in margins.  Deutsche Bank’s David Bianco has also pointed this out before. Both point to lower interest rates and shift in sales toward overseas regions where tax rates are lower.

profit margins

Photo: BMO Capital Markets

It’s hard to imagine profit margins going much higher from here, but this was an argument that was also made this time a year ago.

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