Good morning.
The Fortune 500 brought in more revenue last year than ever before in history—$18.1 trillion, up from $16.1 trillion in 2021 (and more than the GDP of China.) But profits fell sharply, to $1.56 trillion from $1.84 trillion.
Why? The reasons are clear to anyone running a business. Supply chain problems raised prices, labor shortages increased wages, the Fed raised interest rates, and pretty much anything that could increase costs happened. The notion of “greedflation,” favored by some on the left, is belied by the numbers. Revenues may have jumped 12%, but costs rose faster.
It’s worth looking at who bucked the trend, with rising profits. Energy companies topped the list, benefitting from the swing in oil prices. PBF Energy saw its profits jump 1145%, while Valero Energy had a 1140% increase. That was followed by companies who reaped the windfall from post-pandemic “revenge” travel: Expedia (up 2833%), Hertz (up 463%), Delta Air Lines (up 371%).
What does any of this tell us about the future? Not a lot. Falling profits don’t always augur a recession—although they often do. What happened last year is just an exaggeration of normal cyclical trends—profits are higher in the early parts of a recovery, and moderate in later stages. The profit-busting trend has continued this year, with corporate profits tumbling in the first quarter. And hedge fund investor Stanley Druckenmiller said last week he believes corporate profits could fall another 20% to 30% before it’s over.
Will the end result be a recession? “There’s going to be a recession at some point,” says John Leer, chief economist at Morning Consult. “It’s like asking, ‘Is it gonna rain.’ Well, eventually yes, it will rain.
Will Daniel unpacks all this in a piece on Fortune that you can read here. And you can play around more with all the great data behind the Fortune 500 list here.
Separately, Peter and I both wrote last week about how the letters “ESG” are falling out of favor in the U.S. But what they stand for—attention to a company’s impact on people and planet—has not. We will once again be assembling our community of top executives responsible for the opportunities formerly known as ESG in Atlanta Sep. 12-13. Attending will be top executives from companies like L’Oreal, PayPal, Cisco, Colgate and Meta. Our partner for the event is EVERFI. On the agenda: Sharing ideas on how to maintain the best of ESG while avoiding the political crossfire. If you are interested, you can learn more here, or shoot me an email.
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Alan Murray
@alansmurray
alan.murray@fortune.com
