The performance of the top companies around the globe can be a telling sign of our current economic environment — and an insightful opportunity for where sellers can Seek to Serve™ their buyers.
In Mereo’s fifth annual revenue performance report of Fortune 500, Global 500 and Russell 2000 companies for the 2017/2018 fiscal years, we have uncovered results not seen since before the 2007/2008 recessionary period — signs of positive growth in top companies.
Albeit there was still a significant portion of companies that experienced declining revenue or sluggish growth, especially compared to their peers, many organizations’ fortunes have improved. And this improvement is likely due to the effects of tax legislation and the stronger GDP.
In comparison, the Mereo 2016/2017 Revenue Performance Report showed a trend of increasing profits yet decreasing revenue. But this year’s report tells us a new story.
In this past fiscal calendar year, just 21% of Fortune 500 companies experienced decreased revenue; a year ago that number was an unnerving 48%. While this marks significant improvement in the performance of revenue laggards, it is still somewhat shocking that one in five of these companies had declining revenue and another 9% grew at less than 2% year-over-year.
Mid-sized companies, as represented by the Russell 2000, for the first time in our review performed worse than their larger counterparts with 27% showing declining revenue and only 46% growing at more than 5%.
On the other end of the spectrum, for the first time since the 2007/2008 recession, more than 50% of the Fortune 500 companies (50.7%) had revenue growth of more than 5% — which is over twice the number of companies when compared to last year.
This leaves us with a corporate landscape defined by “haves” and “have nots” — with the haves creating a significant performance gap between themselves and their poorly performing counterparts.
Companies’ Strategies in 2019 and Beyond
In our current economic environment, companies continue to focus on driving down costs and improving productivity. By doing so they will work toward improving profitability as confirmed by the most recent quarterly earnings reports that showed S&P 500 results averaging over 3.3%.
On the positive side, in addition to having stronger growth overall, companies in Quarter 1 forecasted positive earnings revisions by over a 2-to-1 ratio (Seeking Alpha April 28 S&P Earnings Analysis Brian Gilmartin). This means companies are committing to their shareholders that they will see continued earnings growth by either improving revenue or lowering costs — or both.