Industry profits data came out earlier this week and have added a new chapter to the “tale of two cities” that has been our recurring theme.

In Q3 2018, for the industry on average, profits before taxes were 3.94% of revenues, and for the last six quarters, they’ve averaged 4.12% of revenues. Unfortunately, in Q2, profits before taxes were 6.15% of revenues.

What happened?

For large printers ($25+million in assets), profits before taxes were 0.37% of revenues (they were 3.55% a quarter ago), and for the last six quarters they’ve averaged 1.04% of revenues. (Remember, in Q4 2017 and Q1 2018, profits before revenues for large printers were negative numbers.) But for smaller printers (<$25 million in assets), Q3 profits before taxes were 7.71% of revenues (8.84% in Q2), and for the last six quarters averaged 7.41% of revenues.

So, as we have been seeing for the past several years, the low profitability of large printers is a drag on overall industry profitability.

Which is a shame, because overall annualized profits for Q3 were up from Q2 to $3.07 billion.

Another piece of good news helping drive this, which we will share next week, is that the October shipments report was quite good.