The Most Profitable American Companies
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As it does each January the financial website 24/7 Wall St. recently forecasted the most profitable American companies for 2013. The list is dominated by high tech, energy and financial services businesses. I will focus on five of them for this article.
Roger Daltry once sang "meet the new boss, the same as the old boss." That could apply to the defending earnings champion from 2012 and projected number one ranked company for 2013. Apple (NASDAQ: AAPL), the high tech supplier of the Mac, iPhone, iPod, and iPad, is poised to generate $46 billion in profit this year, a 10% increase over last year's total, on sales of $191 billion, up 23% over 2012.
Many in the financial media, a lot of bloggers, and some analysts and investors are now betting against the company. The naysayers claim that Apple cannot simply maintain its torrid growth and high margins for much longer and its valuation is way too high. They may be correct to some extent as Apple could be in that transitional phase between a "growth" and a "value" company. Things should be clearer when the company announces financial results for its fiscal 1st quarter in a few days. An earnings "disappointment" could set the tone for the rest of the year and continue to drive the share price down. Shares have declined by about 29% since reaching an all-time high of around $705 in September. An earnings "beat" could drive the stock upward and Apple could possess the world's first trillion market cap eventually.
The 2nd ranked company on the list is ExxonMobil (NYSE: XOM). The energy giant is projected to grow earnings by 2% to $37 billion in 2013, but revenues are expected to fall by 1% to about $473 billion. The company should hold on to its spot at number one on the Fortune 500 list in that category, however. ExxonMobil also trails Apple in market capitalization, $406 billion to $491 billion.
ExxonMobil will continue to benefit from technical innovations in energy production. Some of the methods, like hydraulic fracturing and horizontal drilling, are contributing to an oil and natural gas fueled economic boom in some areas of North America such as North Dakota, Texas and Alberta, Canada.
Earnings at Chevron, another major oil and gas producer, will probably be relatively flat in 2013 at $24 billion. Revenues are estimated to grow by 8% to $260 billion. Of course a lot will depend on how oil prices trend this year. The company's market cap is well behind Apple and ExxonMobil, at $216 billion. Chevron will also benefit from the boom with several projects underway worldwide.
Microsoft also is expected to have earnings of around $24 billion, up 7% from 2012 levels, on revenue of $80 billion. The company just edged out Chevron in market cap by $6 billion. Microsoft, founded by one of the world's richest people and most famous college dropouts in history, Bill Gates, recently released the latest version of its PC operating system, Windows 8. It has garnered mixed reviews so far. The company is also trying to gain a foothold in the smartphone space with the Windows Phone. So far it hasn't been a big seller.
In 6th place is International Business Machines (NYSE: IBM). IBM seems to be adapting well as it has successfully transitioned from a hardware company (it used to be the number one manufacturer of PC's) to a provider of business services. Big Blue is betting heavily on Big Data. Earnings are expected to increase 10% to $19 billion this year. Revenues will be about $107 billion. The company has reduced the number of its shares by a third over the last decade as a means of returning value to its investors.
I'll be following the fortunes of some of the members of the most profitable companies list with vested interest this year. I'm projecting that 24/7 Wall Street will be on target with their estimates.
Mathman6577 owns shares of Apple and International Business Machines. The Motley Fool recommends Apple and Chevron. The Motley Fool owns shares of Apple, ExxonMobil, International Business Machines., and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!