The most surprising business story of the past four years is expected to persist 🤯

Profit margins are high, and analysts expect them to go higher 💸

Corporate America’s ability to expand profit margins and maintain them at historically high levels is arguably the most surprising business development of 2021, 2022, 2023, and 2024.

As this chart from Carson Group’s Sonu Varghese shows, analysts expect further margin gains in the months to come.

Analysts’ forecasts for sales and earnings imply profit margin gains in the months to come. (Source: Carson Group)

And as Sherwood News’ Matt Phillips recently noted, it’s “not just the largest publicly traded corporations that dominate the U.S. stock markets.“

Matt pointed to last week’s BEA report on Q2 corporate profits, which showed businesses across the economy are benefitting from high margins.

Profit margins across the economy are elevated. (Source: Sherwood)

There’s a decent amount of variation in profit margins across industries, as the chart below from FactSet shows…

Profit margins vary across industries. (Source: FactSet)

…but it’s notable that most companies in most industries have seen margins improve from year-ago levels.

Most companies have reported higher margins than year-ago levels. (Source: FactSet)

There are at least two big reasons margins continue to hold up.