By Caroline Valetkevitch
NEW YORK, Dec 21 (Reuters) - The U.S. economy may sleepwalk its way to recovery next year, but corporate earnings are set for a record 2011 thanks to strengthening overseas demand.
Overseas sales, particularly in emerging markets, will be key for profits for many U.S. companies in 2011, and sectors that have outperformed this year are expected to remain top bets, based on strong demand from emerging economies.
"Part of the growth profile for U.S. corporations ... is their exposure to global economies, particularly emerging economies," said Hank Smith, chief investment officer at Haverford Trust Co in Philadelphia.
Standard & Poor's 500 companies <.SPX> are expected to earn a record $95.98 per share in 2011, based on Thomson Reuters data. That would exceed the 2006 per-share record of $88.12.
Overall earnings growth for S&P 500 companies is forecast at 13 percent, compared with the 37.5 percent estimate for 2010, according to John Butters, Thomson Reuters director of U.S. earnings. He cited more difficult year-over-year comparisons.
Estimated per-share earnings for 2010 are $84.75.
S&P 500 foreign sales and overseas pre-tax income have risen sharply over the last decade. Technology, materials, energy and industrials are the sectors with the highest foreign sales, according to Bank of America-Merrill Lynch research.
The materials sectors is expected to lead earnings, with growth of 29.9 percent in 2011, followed by financials and energy.
This year, the industrials and materials sectors are the second- and third-best S&P 500 sectors in terms of year-to-date performance, after consumer discretionaries.
Industrials <.GSPI> are up 22.7 percent, while materials <.GSPM> are up 17.2 percent.
Consumer discretionaries <.GSPD> are up more than 25 percent to lead the S&P in 2010. However, materials have taken off since the beginning of September, rising 21 percent, driven by strong earnings outlooks and rising commodities prices.
The materials sector has the second-largest increase in 12-month earnings expectations over the last 30 days, at 1.6 percent, just behind energy, at 1.7 percent, according to data from Thomson Reuters' StarMine.
Among the materials sector's leaders this year is DuPont
Investors have been flocking to shares in the sector that
display strong momentum for more gains. Names with scores at or
near 90 include Dover Corp
U.S. companies are seeing a larger part of their sales come from emerging economies such as Brazil, India and China. Earnings estimates for 2011 are factoring in higher revenue from those markets, said Thomson Reuters Butters.
The U.S. economy is expected to register gross domestic product growth of 2.7 percent in 2011, according to Reuters data, with the U.S. unemployment rate remaining high, at 9.8 percent. While the GDP forecast is still among the highest for developed economies, it is well below that of some emerging markets.
Global GDP growth for 2011 is forecast at 4.8 percent and emerging and developing economies at 6.4 percent, according to the latest International Monetary Fund figures published in October. Bank of America Merrill Lynch analysts said emerging markets will account for 80 percent of global growth in 2011.
"Developing economies are leading developed economies, so part of our emphasis is we're going to show a preference toward those companies that have exposure to emerging markets," said Haverford Trust's Smith.
His firm recently bought shares of Whirlpool Corp
The average percentage of international revenue for S&P 500 companies in 2009 was 29.5 percent, according to data from Bespoke Investments Group in Harrison, New York. Data for 2010 was not yet available.
Caterpillar, up about 64 percent since the start of the year, said in its most recent earnings statement that developing countries, including China, India and Indonesia, accounted for about half the growth in quarterly machinery sales.
"Corporate America has done, and in my opinion will
continue to do, a really great job of managing their businesses
in a mixed economic environment," Bob Doll, vice chairman at
BlackRock Inc
"Part of the way they have done that is what they do outside the United States."
The S&P 500 is up about 85 percent since March 2009 and about 12 percent for 2010. It is forecast to end 2011 at 1,325, according to the median Thomson Reuters estimate. For details, see [ID:nN06217731] (Editing by Dan Grebler)