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Corporate Profit Margins to Increase Through 2014, Says Morgan Stanley

NEW YORK ( TheStreet) -- U.S. corporations will generate increased profitability on average during each quarter through 2014, Morgan Stanley said in a report published Monday.

Gross margins for the top 1,500 equities are at 29%, and are forecast to reach an average of 34.6% by the end of 2014, Morgan Stanley said in a report led by equity analyst Adam Parker. Net margins among the top 1,500 U.S. stocks finished the first quarter at 7.15%, and are forecast to average 8.8% by the end of next year.

The largest 50 corporations by market capitalization, the so-called mega-cap stocks, have expanded their net margins at the highest rate. Overall, margins for mega-cap equities are 11.6% compared to 6.2% for large cap stocks, 4.5% for medium-cap stocks and 2.7% for small-cap stocks, Morgan Stanley said.

Corporate profitability peaked in the June quarter of 2011 for the largest 1,500 stocks and has declined every quarter since then, on average. All sectors except telecommunications are forecast to post net margins in the top quintile by 2014 compared to historic norms, the bank said.

-- Written by Leon Lazaroff in New York

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