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Profit margins have reached their highest level on record, and recent FactSet data show the increase in corporate earnings is drawing from more than sales growth. The figures give the equity rally an earnings foundation.
What FactSet found FactSet data show earnings are rising at a pace that revenue growth alone does not account for. Companies are widening the spread between what they bring in and what they keep.
That spread, measured as a margin, has now reached a record, according to FactSet. Revenue growth reflects how much business a company is transacting; margin expansion is a different mechanism.
When the bottom line grows faster than the top line, cost control or pricing is doing the work. The FactSet data show that is the pattern in the current earnings cycle.
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