Record Corporate Profit Margins

“One item that hasn’t gotten much attention lately is corporate profit margins, which are near record highs. Since the financial crisis, companies have been cutting operating costs, trimming debt, and increasing exposure overseas — all actions that have boosted margins. But as the bull market and economic recovery have aged, we have heard more and more that margins are topping out or likely to revert to some long-term average or even collapse.

“Morgan Stanley’s Adam Parker doesn’t see any of tumbling margins quite yet.

“’For several years now, there has been an increasingly vocal group of investors and academics arguing that US corporate profitability and productivity has peaked,’ Parker wrote in a research note on Monday. ‘We disagree and would point to this quarter’s EPS results as yet another counterexample to what we argue is an over-reliance on irrelevant historical comparisons.’

“Parker notes that while profit growth has been exceeding expectations during this earnings season, revenue growth has not. Generally speaking, when earnings growth is outpacing revenue growth, profit margins are actually expanding.”

From Business Insider: http://www.businessinsider.com/morgan-stanley-impossible-comination-if-margins-under-pressure-2015-4