Single-digit profits seen for 2007

NEW YORK – The age of double-digit profit growth for American companies appears to be over.

Investors made some pretty hefty portfolio gains in 2006 amid the stock market’s record run, a rally fed in large part by nearly five years of unprecedented earnings growth. But it’s universally accepted on Wall Street that U.S. corporations won’t be able to deliver in the new year the kind of results shareholders have become accustomed to.

“It had to end at some point,” said Jack A. Ablin, chief investment officer at Harris Private Bank. “There is distrust associated with the high level of profits, especially when you see 10 percent profit margins. That’s just unsustainable.”

For the most part, growth in the Standard & Poor’s 500 as an index closely mirrors that of corporate earnings. The index finished last year up 15.8 percent, while all the S&P 500 members posted an average 16.2 percent profit gain.

For 2007, stock market analysts like Ablin feel the S&P 500 index will grow by about 9 percent. Profits for members of the index are expected to make a similar advance.

Alec Young, S&P’s international equity strategist, said that although this year won’t shape up to be anything like 2006, “it’s still pretty attractive looking at the stock markets as a whole.” He said gross domestic product growth is slowing, and that will put pressure on profits in 2007.