NEWS AND COMMENTARY
August 8, 2001
Don't Look For An Earnings Recovery Here
On the surface, it appears as if companies are finally paring down the sky-high inventory levels that have supposedly been hampering an earnings recovery.
But dig a little deeper and you'll see that the length of time projected to clean out those inventory shelves has gotten longer, not shorter. The stock-to-sales ratio, which measures how long it takes to sell all of the present inventory, stretched to 1.33 months in June - the highest since February 1999.
Sales are dropping at an even faster clip than production. The manufacturing sector has been contracting for the last 12 months. Even so, inventory levels still haven't budged significantly. That's because sales plunged 0.9% in June after falling 0.5% in May. In fact, sales have dropped in 4 out of the past 5 months.
As the slowdown wears on, sales are only going to topple further. And that will mean even more cuts in the manufacturing sector. Plus, companies will have to slash prices in order to unload the product that has been sitting on factory shelves for months. And that means businesses will continue to post lousy profits in the coming quarters.
Friendly Version Previous Article
Subscribers: Check the latest
Weiss Stock Risk Ratings
before you make your next move!
Non-subscribers: Register Here for three free Weiss Stock Risk Ratings Reports
Sign-up to get SMR's News and Views Commentary emailed directly to you!
Current Issue |
Investment Tools |
About Our Staff |
Sample Issue |
® 2001 Weiss Incorporated
4176 Burns Road, Palm Beach, FL 20005
tel: (561) 627-3300 - fax: (561) 625-6685