Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

UBS: Companies Are Reporting Strong Q1 Profits 'Entirely Due To Profit Margins'

Sam RoApr 10, 2013, 22:29 IST

Bloomberg TVThe sustainability of record high corporate profit margins may be one of the hottest debates in the stock market.

Analysts are split on whether or not margins will soon fall to historical averages.

But one trend is emerging from the Q1 earnings announcements we've seen so far: margins are fatter than expected.

"Of the 22 S&P 500 companies that have already reported, 73% beat their earnings expectations by an average of 1.7%," wrote UBS's Jonathan Golub in a note to clients yesterday. "Upside is entirely due to margins not revenues. We expect these trends to continue."

According to Golub's data, only 50 percent of companies have beat revenue expectations. The discrepancy between revenue and earnings surprises can explained by Wall Street's underestimation of profit margins.