Merrill Lynch Disputes 'Tepid' Earnings Scenario

By John S. McClenahen Excess capacity in the technology sector of the U.S. economy is one reason it will to take time for companies to rebuild their profit margins, reports Merrill Lynch & Co. What's more, says the New York-based securities firm, corporate restructuring will extend well into the early stages of economic recovery. "But the conclusion that many draw -- that earnings growth could be tepid for several years to come -- is wrong," insists Bruce Steinberg, Merrill Lynch's chief economist. "As profit margins gradually return to more normal levels, as they always do in recoveries, corporate earnings are likely to grow well above trend for the next several years." Merrill Lynch expects operating earnings for the S&P 500 to rise 13% this year, following a 32% fall in 2001. The outlook for 2003: a 25% increase.

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