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Better-than-expected results but US economy remains in murky waters

FIRST-QUARTER earnings so far from across the market in the United States are coming in better than expected - largely as a result of a very low bar.

More than half the companies in the S&P 500 have reported their first-quarter results. Of those, 65 percent beat analysts' expectations. Overall, results were still down roughly 30 percent from a year ago.

"It's bad - but it's not as bad as we thought," said Bob Doll, global chief investment officer for equities at investment manager BlackRock Inc.

The quarterly results hint at signs of recovery, but the picture remains very murky. It's unclear if the banks at the heart of the meltdown are seeing better results because the worst is over or due to the benefit of new accounting measures.

Even within industries, the reports were a mixed bag. In the technology sector, one of the highlights came from Apple Inc, where strong °?iPhone sales helped boost quarterly profit 15 percent.

But more often, the recession took its toll, even on names such as Google Inc. The company's profit rose 9 percent for the quarter because of cost-cutting, but revenue grew at the slowest rate in Google's history as a public company.

Cutbacks and savings

Doll noted that across the board, most of the companies that beat expectations did so through cost reductions rather than top-line growth. In other words, the better results came from job cuts and store closures, rather than more sales.

In restaurants, sit-down chains such as the Cheesecake Factory reported better-than-expected profits even as sales slid, because it was able to offset sales and traffic declines with cost cuts. Meanwhile, fast-food chain McDonald's Corp saw its first-quarter profit climb nearly 4 percent as more customers worldwide came to them for a lower-priced meal.

In airlines, the largest American companies again posted losses for the quarter, although not as bad as analysts expected. UAL Corp, parent of Delta Air Lines and United Airlines, lost US$1.2 billion, while AMR Corp, the parent of American Airlines, lost US$375 million. But low-cost carriers JetBlue and AirTran managed to post profits.

Chief executives from many companies have all couched their comments by saying given the economy, they were pleased with results.

Banking was one of the brightest spots. The better-than-expected results for banks reassured many investors that the industry is not as sick as many feared when 2009 began.


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