2Q Earnings themes: Managing to margins, cautious on recovery

- Unemployment remains a top risk for corporate managements "Managements indicated a generally positive 2H outlook tempered by caution regarding the US consumer. Views differed across sectors, with Industrials and Materials more positive and Health Care more conservative."
- Managements continue to focus on margin improvement "Many firms guided to flat or slightly higher sequential margins in 2H and seemed to place a higher priority on attaining target margin levels relative to other performance metrics. Managements indicated that large portions of previous cost cuts are likely to remain “permanent”."
- Large cash balances used for buybacks and debt reduction "Free cash flow generation has been strong and boards are authorizing fresh repurchases. Many previous authorizations have been exhausted. Debt reduction has been more prevalent than in prior quarters."

GoldmanSachs US Portfolio Strategy 20100811

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