Earnings: Beyond a Big Fourth-Quarter Spike

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U.S. companies are poised to post the biggest profit gains since the recession began in 2007. Strategists hunt for signs of sustained earnings growth


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Although corporate profits in the fourth quarter will likely be dramatically better than a year ago, CEOs aren't pounding their chests yet.


Most chief executives acknowledge that the fourth quarter brought higher sales but remain reluctant to provide guidance that looks much into the future, says Hank Herrmann, chief executive of Waddell & Reed Financial (WDR), an Overland Park, Kan., fund company that manages $70 billion.


"A few [companies] are building backlogs, but not a lot. A few people are talking about their book of business improving some, but not a lot," he says. "Part of it is most CEOs still doubt the strength of final demand. The first quarter will be the first time where they start to feel confident about the demand they see. The fourth quarter still has too much of a seasonal element and [they worry that] the inventory rebound could be ephemeral."


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