Via Moody’s:
Profits Growth Curbs Defaults
First quarter 2018’s earnings season has arrived. Though the annual increase of corporate revenues is expected to slow from its pace of 2017’s final quarter, operating income is expected to quicken. Tax cuts and the containment of labor costs help to explain the expected improvement in operating leverage, or the projected acceleration of operating income relative to revenue growth. In addition, to the degree the Federal Reserve’s estimated rates of capacity utilization capture reality, February 2018’s relatively low utilization rates of 78.1% for all U.S. industry, 77.4% for manufacturing, and 77.1% for manufacturing excluding high technology provide room for the faster growth of operating profits relative to sales.
