The sustainability of record-high profit margins continues to be one of the hottest topics in the markets.
Most experts agree that we’re due for some profit margin contraction wages eventually increase and prices eventually come down.
But the latest data show that margins, for now, are only going higher.
“The rolling four-quarter operating margin is tracking at 8.9%, a return to the previous peak reached in 3Q 2011,” wrote Goldman Sachs’ Amanda Sneider, who cited information coming from Q4 earnings announcements.
“While the majority of operating margin expansion is due to the anniversarying of negative atypical operating items and pension-related gains this quarter, margin levels that exclude these items also returned to peak levels,” added Sneider. “We expect margins to remain flat over 2014, although consensus expects further expansion to 9.5%.”
The benefit of lower pension costs is not a surprise as the surging stock market has put many pension funds closer to funded status.
Still, that increased level of financial flexibility has not yet been offset elsewhere.
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