Tech, Consumer Stocks Still Driving Up Profits

U.S. companies’ second-quarter profits are forecast to rise about 12% on average, the biggest gain since the first quarter of 1997, lifted by consumer demand for cars, fast food and computers.

Software companies, auto makers and consumer-goods producers will set the pace, according to First Call Corp., led by companies such as IBM Corp., General Motors Corp. and McDonald’s Corp. Those industries fueled the 10.5% rise in first-quarter profit for Standard & Poor’s 500 index companies.

“Technology and consumer stocks have been driving the market, and they’re not letting up,” said Chuck Hill, director of research at First Call, a New York firm that tracks analysts’ earnings forecasts.

Even oil companies, such as Exxon Corp. and Chevron Corp., which have been dragging down overall corporate results, are expected to post smaller declines than in the first quarter.

The gains will be held in check by companies vulnerable to lagging overseas markets. Gillette Co., the world’s biggest maker of razors and blades, said profit will fall 20% because of declining sales in Brazil, Russia and Japan.

Technology companies such as Microsoft Corp. and Cisco Systems Inc. are expected to lead the group to a 42% profit increase, according to First Call.

For the second half, U.S. companies may have even stronger results. Corporate profits are expected to surge 21.9% in the third quarter and 21.1% in the fourth quarter, according to First Call.

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Bright Forecast

Earnings per share for companies in the Standard & Poor’s 500 stock index are expected to rise as much as 12% in the second quarter from a year earlier, based on analysts surveyed by First Call. Quarterly actual or estimated EPS percentage change since 1997:

Second quarter 1999*: 12.0% (estimated)

* 3rd and 4th quarters also estimated

Sources: First Call, Bloomberg News