2011 Looking Bright for U.S. Company Growth and Purchases

Companies are looking to expand and that means new equipment purchases in the near future.  This outlook is bright coming off of two tough years in the equipment leasing industry.  Slow growth combined with economic uncertainty was not a good combination for the leasing industry.  There seems to be a bright light at the end of this tunnel. Forecasts seem promising and the tax benefits for companies to buy are enticing.

Investment by U.S. companies in equipment and software in the third quarter was up 15% from a year earlier to $1.08 trillion, nearly matching prerecession levels, government data show.

Corporations received more incentives to invest Dec. 17, when President Obama signed into law a tax compromise reached by Congress that, among other things, lets companies deduct from taxable income 100% of certain types of investments in 2011.

It seems that big U.S. companies have cleaned up their balance sheets and, appear to be flush with cash.  These U.S. companies are open to using the cash in 2011 on factories, stores and even hiring. Companies worked hard the last few years and especially in 2010 to preserve cash, and are slowly coming around to spending it.  According to Bloomberg Business U.S. companies are turning around and starting to feel comfortable with the economic outlook.

The maker of specialty glass and ceramics is investing $300 million to expand its research and development center near its headquarters in Corning, N.Y., adding about 100 researchers and Ph.D.s. It also is spending $800 million on a liquid-crystal display factory in China and building more LCD capacity in Taiwan.

Engine maker Cummins Inc., meantime, plans to add about 2,500 U.S. jobs in 2011, many requiring engineering or other technical skills. In 2010, Cummins raised its U.S. employment by only 185 people. The company has about 14,800 U.S. employees.

At the end of the third quarter, cash held by 419 nonfinancial companies in the Standard & Poor's 500 list was up 49% from three years ago—before the start of the recession—while total debt was up a more modest 14%, according to an analysis by The Wall Street Journal.

The good news: The improvement in just the past year was even more pronounced: cash was up 10.6% from the 2009 level, while debt grew 2%.

Profits are higher, too, after companies slashed their work forces and closed less-efficient operations. Total U.S. corporate profits in 2010's third quarter rose 26% from a year earlier to $1.64 trillion, the highest in four years, according to government data.

With this stronger foundation, coupled with new confidence about the global economy, corporations are looking to expand.  Continued growth in the mining and energy businesses around the world is expected to fuel a wide range of U.S. companies. IT spending seems to be on everyone’s mind and will head up the priority spending list this new year.

Source:

Standard & Poors Capital IQ

Bloomberg Business

Wall Street Journal