Corporate America is poised to report a second consecutive quarter of strong earnings, as companies find ways to squeeze additional profit from each dollar of sales in a high-growth, low-inflation economy.

Industry analysts now anticipate that earnings for the 500 companies that make up the Standard & Poor's 500 will be as much as 15 percent higher than a year earlier in the quarter that ends June 30, according to the research firm First Call Corp. That comes on the heels of a first quarter in which the companies reported earnings 10.5 percent higher than in the first three months of 1998.

The strong performance occurs despite warnings from some big-name companies of lower-than-anticipated earnings -- or even losses -- for the period. Among the laggards are Bethesda aerospace giant Lockheed Martin Corp., No. 1 personal computer maker Compaq Computer Corp. and personal products maker Gillette Co.

"The second quarter is going to be a terrific quarter for earnings growth, and you've got another one coming behind it," said First Call's research director, Charles Hill. He said third-quarter earnings are currently pegged to rise by 20 percent, bolstered in part by comparisons with a weak quarter in 1998, when earnings fell by 3.1 percent.

What's behind the bullishness? Two things: first and foremost, the continued strong U.S. economy, but also the ability of companies to squeeze more profit from every dollar of sales through relentless cost cutting and investments in efficiency-improving technology.

Dell Computer Corp., for example, has shaved its operating expenses by 14 percent in the past three years with increased use of the Internet to sell its products. Wal-Mart Stores Inc., the world's largest retailer, which saw same-store sales increase 9.3 percent in the first quarter, said recently that it plans to spend $800 million on new computerized systems to further lower costs.

The first-half profit performance is a sharp rebound from late last year, when companies, suffering from slumping sales overseas, posted a 3.1 percent decline in earnings in the third quarter and single-digit growth in the fourth. Companies worried then that U.S. economic growth would slow as exporters were unable to sell their goods to weakened overseas markets.

But the reverse happened. Fear of financial chaos abroad led foreign investors to seek haven in U.S. Treasury bonds, sending interest rates to some of their lowest levels in years and helping to fuel a consumer spending spree at home. Within the United States, purchases of homes, cars and consumer electronics soared.

"Global and domestic economic developments suggest that a broad-based recovery in S&P 500 earnings per share is in the works this year, as a number of unanticipated events have worked together to reverse the decline in profit margins witnessed in 1998," Steven Wieting and Mitchell Held, economists for Salomon Smith Barney Holdings Inc., wrote in a report to clients last week.

Legg Mason Wood Walker Inc. strategist Richard Cripps said analysts at his Baltimore-based brokerage have been hearing nothing but good news as they make the rounds among the companies they follow.

"Everything they heard from them was citing the good economy," Cripps said, pointing out that growth in output rose at better than a 4 percent annual rate in the first quarter, well above projections.

"It's the tail wind from a strong economy," he said. "Keep in mind, at the beginning of the year most analysts, most economists and most companies were [expecting] a growth rate of 2 percent. We're double that."

Among industries that will post the strongest earnings gains, analysts said, will be retailers, home builders, automakers and supermarkets.

"The strength will clearly be in retailers, driven by the low unemployment and the wealth effect that's related to the strong stock market," said Ned Riley, chief investment strategist at BankBoston Corp. "In the auto area, too, we're working on almost a record quarter for auto sales."

James Gribbell, manager of the Babson Growth Fund, said he expects the strongest performance of all will come from companies in the technology area, particularly telecommunications and semiconductor firms.

"There's just an enormous amount of demand for bandwidth, driven by the Internet," said Gribbell, whose $500 million fund counts MCI WorldCom Inc. among its biggest holdings.

Analysts said the bad news emanating from such household names as Gillette and Compaq is largely specific to those companies and not indicative of widespread problems.

Gillette cited difficulties in developing markets overseas in warning of a low-single-digit percentage increase in its second-quarter profits, while Compaq is reeling from not having adapted quickly enough to competition from Dell and Gateway 2000 Inc.

Companies such as Gillette, which derive a large portion of their sales from developing economies, are finding it hard to estimate profits from those countries, said Mark Godfrey, a senior analyst with the Invesco family of mutual funds.

"What you saw from Gillette last week was those economies did not turn around as quickly as they foresaw," Godfrey said.

The one cloud on the earnings horizon is the widespread expectation that the Federal Reserve Board will lift interest rates a notch when its policymaking committee meets next week. But most analysts and economists believe a small increase in rates will have little effect on the streamrolling U.S. economy. That, along with the fact that third-quarter profits this year will be viewed in comparison with a decline for the same period last year, means the profit rebound should continue.

Still on Track

The technology sector is expected to have another very strong quarter (though not quite as strong as last), while sectors that have been lagging the most -- such as energy -- are expected to improve.

Best- and worst-performing S&P sectors

Technology

1st quarter

42%

2nd quarter, projected

38%

Consumer cyclicals

1st quarter

20%

2nd quarter, projected

27%

Communications services

1st quarter

28%

2nd quarter, projected

16%

Transportation

1st quarter

-10%

2nd quarter, projected

14%

Utilities

1st quarter

7%

2nd quarter, projected

6%

Consumer staples

1st quarter

4%

2nd quarter, projected

3%

Basic materials

1st quarter

-21%

2nd quarter, projected

-5%

Energy

1st quarter

-45%

2nd quarter, projected

-15%

SOURCE: First Call