Money with word earnings

Jeremy Hobson: Later today, the aluminum company Alcoa will kick off corporate earnings season here in the U.S. Analysts are bracing for a less-than-stellar quarter for U.S. companies, reflecting the global economic slowdown we've been seeing in recent months.

And that's where we're going to start now with Juli Niemann, an analyst at Smith Moore and Company who joins us from St. Louis live as she is every Tuesday. Good morning.

Juli Niemann: Good morning Jeremy.

Hobson: So Juli, are you expecting a less-than-stellar corporate earnings season?

Niemann: Overall it should be pretty good; it's going to be a little mixed in some areas. Profit margins are excellent -- a lot of cost cutting, we've got stock re-purchases. Companies are sitting on hoards of cash here. Except of course for the financials -- we've got a continuing stream of bad news for banksters -- bad mortgages, bad debt, trading profits.

A lot of mixed signals though, because what we're looking at is a lot of the metals are starting to drop off here. Over the last two months we had a big drop of prices due to faltering demand. China is slowing down and they're no longer stop piling metals. And here in the United States we're got a big surge in automotive demand, but that's pretty much over -- leases are up, they need old cars, new cars, repairs too high. That all helped, but now, we're looking at a real fall-off in demand here.

Hobson: Well Juli, but as we hear that corporate profits doing okay, you've got to think that over the last several quarters as they've done well -- it hasn't really trickled down in the form of jobs. How much do corporate earnings really matter?

Niemann: Well they matter to shareholders -- indirectly for your 401k investments and pensions, or what's left of it. But for the average American, the corporate good news really isn't having any impact on them. They're not expanding, they're not hiring. What hiring they're doing is very, very modest.

Here in St.Louis, we've got the good news that Emerald Automotive is taking over an old Ford assembly plant. They're going to be manufacturing new electric mail vans, and they'll be sold in Europe. But the job postings? Eleven jobs. So even the expansion that you're seeing is very, very modest. So corporations are doing very well, it just isn't trickling down to the rest of us.

Hobson: Juli Niemann, analyst with Smith Moore and Company, thanks as always.

Niemann: You bet.

About the author

Juli Niemann is executive vice-president for research and portfolio management with Smith, Moore and Company.

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