Stock Market Briefing: NIPA vs. S&P Profits Margins January 2, 21 Dr. Edward Yardeni 1-972-73 eyardeni@ Joe Abbott 732-97-3 jabbott@ Please visit our sites at www. blog. thinking outside the box
Table Of Contents Table Of Contents S&P Operating Profit Margins Profit Margins 3- Margins & Costs -9 January 2, 21 / Stock Market Briefing: NIPA vs. S&P Profits Margins www.
2 1 Figure 1. Profit Margins AFTER-TAX CORPORATE PROFITS: NIPA vs. S&P * (billion dollars, quarterly) 2 1 1 1 NIPA After-Tax Profits (saar) Based on Tax Returns* From Current Production** 1 1 2 2-2 - - - - S&P Net Income (actual x, nsa) Operating (S&P data) Reported on GAAP basis (S&P data) 7 72 7 7 7 2 9 92 9 9 9 2 1 1 1 2-2 - - - - * Excluding IVA & CCadj. ** Including IVA & CCadj. These two adjustments restate the historical cost basis used in profits tax accounting for inventory withdrawals and depreciation to the current cost measures used in GDP. Source: Bureau of Economic Analysis and Standard & Poor s. Figure 2. CORPORATE PROFITS MARGINS IN GDP (after-tax profits as a percent of nominal GDP) 2 Based on Tax Returns* (9.) Based on Current Production** (.9) 7 9 1 3 7 9 1 3 7 9 71 73 7 77 79 1 3 7 9 91 93 9 97 99 1 3 7 9 11 13 1 17 19 21 2 * Excluding IVA & CCadj. ** Including IVA & CCadj. These two adjustments restate the historical cost basis used in profits tax accounting for inventory withdrawals and depreciation to the current cost measures used in GDP. Source: Bureau of Economic Analysis. Page 3 / January 2, 21 / Stock Market Briefing: NIPA vs. S&P Profits Margins www.
13 11 Figure 3. Profit Margins S&P OPERATING PROFIT MARGIN (Thomson Reuters data) & AFTER-TAX CORPORATE PROFIT MARGIN (without IVA & CCAdj) 13 11 9 Corporate Profits After Tax* (blue line) 9 7 7 3 2 S&P Operating Profit Margin Using TR Earnings** (percent, quarterly, nsa) (red line) 7 9 1 3 7 9 1 3 7 9 71 73 7 77 79 1 3 7 9 91 93 9 97 99 1 3 7 9 11 13 1 17 19 21 2 3 * After-tax profits as reported to IRS excluding Inventory Valuation Adjustment (IVA) and Capital Consumption Adjustment (CCAdj), which restate the historical cost basis used in profits tax accounting for inventory withdrawals and depreciation to the current cost measures used in GDP. ** Operating Proft Margin derived using revenues from S&P and earnings from Thomson Reuters I/B/E/S. Source: Standard & Poor s, Thomson Reuters I/B/E/S and Bureau of Economic Analysis. 1 Figure. S&P REPORTED PROFIT MARGIN & AFTER-TAX CORPORATE PROFITS MARGIN ( without IVA & CCAdj) 1 - Corporate Profits After Tax* (9.) S&P Profit Margin: Reported (percent) (9.2) - - - -1 2 2 7 72 7 7 7 2 9 92 9 9 9 2 1 1 1 2-1 * After-tax profits as reported to IRS (without IVA and CCAdj). Source: Standard & Poor s, Thomson Reuters I/B/E/S, and Bureau of Economic Analysis. Page / January 2, 21 / Stock Market Briefing: NIPA vs. S&P Profits Margins www.
11 Figure. Profit Margins S&P OPERATING PROFIT MARGIN & AFTER-TAX CORPORATE PROFIT MARGIN (with IVA & CCAdj) 11 Corporate Profits After Tax* (.9) 9 S&P Profit Margin: Operating (percent) (.9) 9 7 7 3 3 2 7 9 1 3 13 1 17 19 21 7 9 1 3 7 9 71 73 7 77 79 1 3 7 9 91 93 9 97 99 1 3 7 9 11 2 * Profits after tax with IVA and CCAdj. Source: Standard & Poor s Corporation and Thomson Reuters I/B/E/S and Bureau of Economic Analysis. 1 Figure. S&P REPORTED PROFIT MARGIN & AFTER-TAX CORPORATE PROFIT MARGIN (with IVA & CCAdj) 1 - Corporate Profits After Tax* (.9) S&P Profit Margin: Reported (percent) (9.2) - - - -1 7 9 1 3 7 9 1 3 7 9 71 73 7 77 79 1 3 7 9 91 93 9 97 99 1 3 7 9 11 13 1 17 19 21-1 * Profits after tax with IVA and CCAdj. Source: Standard & Poor s Corporation and Thomson Reuters I/B/E/S and Bureau of Economic Analysis. Page / January 2, 21 / Stock Market Briefing: NIPA vs. S&P Profits Margins www.
7 Figure 7. Margins & Costs AFTER-TAX CORPORATE PROFIT MARGIN & COSTS Compensation of Employees Plus Private Fixed Investment 7 Q Corporate Profits After Tax* 2 2 7 72 7 7 7 2 9 92 9 9 9 2 1 1 1 2 22 2 * After-tax profits as reported to IRS (without IVA and CCAdj). Source: Bureau of Economic Analysis. 7 Figure. COMPENSATION OF EMPLOYEES + PRIVATE NONRESIDENTIAL FIXED INVESTMENT 7 7 7 Q 2 2 7 72 7 7 7 2 9 92 9 9 9 2 1 1 1 2 22 Source: Bureau of Economic Analysis. Page / January 2, 21 / Stock Market Briefing: NIPA vs. S&P Profits Margins www.
Figure 9. COMPENSATION OF EMPLOYEES Margins & Costs Q 2 2 2 7 72 7 7 7 2 9 92 9 9 9 2 1 1 1 2 22 2 Note: Shaded areas denote recessions according to the National Bureau of Economic Research Source: US Department of Commerce, Bureau of Economic Analysis. 1 Figure. PRIVATE NONRESIDENTIAL FIXED INVESTMENT 1 1 1 1 1 Q 2 2 7 72 7 7 7 2 9 92 9 9 9 2 1 1 1 2 22 Source: US Department of Commerce, Bureau of Economic Analysis. Page 7 / January 2, 21 / Stock Market Briefing: NIPA vs. S&P Profits Margins www.
2 1 1 1 Figure 11. Margins & Costs UNIT PROFITS OF NONFINANCIAL CORPORATIONS* (2=, sa, ratio scale) 2 1 1 1 2 7 9 1 3 7 9 1 3 7 9 71 73 7 77 79 1 3 7 9 91 93 9 97 99 1 3 7 9 11 13 1 17 19 21 2 * Profits divided by real output. Source: Bureau of Labor Statistics. 27 2 22 2 17 Figure. PROFIT MARGIN OF NONFINANCIAL CORPORATIONS* (2= sa ratio scale) 27 2 22 2 17 1 1 7 7 7 9 1 3 7 9 1 3 7 9 71 73 7 77 79 1 3 7 9 91 93 9 97 99 1 3 7 9 11 13 1 17 19 21 * Profits divided by nominal output (real output x implicit price deflator. Source: Bureau of Labor Statistics. Page / January 2, 21 / Stock Market Briefing: NIPA vs. S&P Profits Margins www.
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