Big US companies bounce back

10 April 2012

NEW YORK: The biggest corporations in America have emerged from the financial crisis in a stronger position than before it began, a study has revealed.

The Wall Street Journal, the news title, assessed 468 companies from the Standard & Poor's 500 index, which tracks the performance of the most valuable publicly-held organisations in the country.

It reported that net income levels among this group were 22.7% higher in 2011 than was the case during 2007, while sales had expanded by 17.1% over the same period.

More specifically, the revenues generated per employee reached $420,000 last year, measured against the total of $378,000 registered at the start of the timeframe under assessment.

The cash reserves held by the featured enterprises have also increased by 49.4% on the 2007 figure, an addition of $1.2tr, in which time capital spending logged a comparatively modest 16.3% improvement.

Cost-cutting and focusing on efficiency was argued to have fuelled this trend. "US companies became leaner, meaner and hungrier," said Sung Won Sohn, an economics professor at California State University.

The businesses that proved especially successful at combining rising profits and headcounts are eBay, the ecommerce specialist, Apple, the electronics pioneer, and Priceline, the online travel agency.

Overall results tended to be stronger among the larger firms in the study, which also only looked at operators that survived the downturn, and therefore may "overstate the health of corporate America".

However, the findings did reflect existing data. A survey of chief financial officers by Duke University and CFO Magazine, for example, found companies with sales of over $1bn are currently the most optimistic.

"It's a real winners-versus-losers phenomenon," John Graham, a professor of finance at Duke University, said.

Another key component of business strategy has been channelling cash and marketable securities overseas, as is the case for two-thirds of the $82bn reserves held by Apple.

Similarly, a significant proportion of the 1.1m jobs created by members of the S&P 500 since 2007 are based outside the US.

Lynn Reaser, chief economist at Point Loma Nazarene University, thus sounded a note of caution. "What's best for an individual firm may not be best for the overall economy," she said.

Data sourced from Wall Street Journal; additional content by Warc staff