With global economies sluggish and sales growth at a crawl, big U.S. companies have had one route to push profits higher: Cut costs and squeeze suppliers. That strategy may be running out of steam.

Revenue at the companies that make up the Standard & Poor's 500-stock index—excluding banks, whose profits have soared—is expected to creep up by just 1.1% in the second quarter from a year earlier, according to Thomson Reuters, which melds Wall Street analysts' projections with company reports.

Earnings, meanwhile, are expected to decline 0.6%. That would be the first profit decline for nonfinancial companies since last autumn and the first time in a year that earnings grew more slowly than revenue, a sign that margin widening is petering out.

Only about half the companies in the index have reported earnings so far. But the results are raising concerns that profit growth could stall unless economic expansion accelerates.

"Earnings are going to run out of growth steam unless we get a pick up in business spending," said David Bianco, chief U.S. equity strategist at Deutsche Bank.

The recently completed quarter marked the fourth of the past five quarters in which sales at S&P 500 companies grew more slowly than the U.S. economy, he said. And there are few signs of a pickup ahead.

Economists estimate that business investment was weak in the second quarter and may have fallen. They believe the U.S. economy expanded about 1% in the second quarter, after inflation. Europe remains mired in a multiyear recession. China, which propelled global growth in recent years, is now slowing.

Those pressures are compounded for some industries by budget cuts and policy changes like the U.S. health-care overhaul and Defense Department cuts. That has left many companies without an easy path to higher earnings.

At toy maker Mattel Inc., MAT +1.57% revenue increased less than 1% amid a slide in Barbie sales. Operating costs rose 9%, including employee salaries and an expense to write down the value of the company's Polly Pocket line of dolls. That drove net income and profit margins lower compared with a year earlier.

A Mattel spokesman said the company is "starting to see strong returns" from the added spending that drove up operating costs, and expects the returns to continue in the second half of the year.

3M Co., whose products include Scotch tape, Nexcare bandages and Post-it Notes, on Thursday reported a 2.6% increase in net income on a 2.9% rise in sales.

3M is known as an extremely reliable profit machine: Dividends have increased annually in each of the past 55 years, and pretax operating-profit margins are consistently above 20%. But executives said margins were hurt this time by lower rates of factory use, a new medical-device tax and foreign-exchange impacts.

Diversified manufacturer United Technologies Corp., UTX +1.53% which makes Blackhawk helicopters, Carrier air conditioners and Otis elevators, reported that the operating margins in its business segments narrowed a bit in the second quarter. They were hurt by the company's Sikorsky helicopter business, which faced a 40% decline in spare parts for the U.S. military, and costs related to its 2012 acquisition of Goodrich Corp.

Excluding the boost from the Goodrich deal, United Technologies said revenue was flat in the second quarter. The company lowered its revenue projection for the year to the bottom end of a previously announced range in the face of sluggish sales of elevators in Europe and military cutbacks. The company is reacting as it has for several quarters by cutting costs.

United Technologies said it would spend $450 million on restructuring operations this year, up from an earlier estimate of $350 million. Those cuts should help push earnings a bit higher this year, the company said. Its climate and controls unit was able to boost profits in the face of no revenue growth by slashing costs.

"Restructuring is just a way of life in corporate America," Chief Financial Officer Gregory Hayes said in an interview.

Net-profit margins for the full S&P 500 have widened sharply since the end of the recession, to 9.7% in the first quarter from 2.8% in the fourth quarter of 2008, according to Thomson Reuters.

That is approaching the peak of 10.1% posted in the second quarter of 2007, back before the financial crisis. Yet many executives and analysts are still projecting that profit margins will climb further in the second half of the year.

Some companies are benefiting from lower raw-material costs. Hershey Co. HSY +2.17% cited cheaper ingredients, and Sherwin-Williams Co. SHW +1.30% pointed to lower chemical costs. PepsiCo Inc PEP +0.74% . said the rate of inflation for key materials like corn and plastics had slowed from last year. All three companies reduced operating expenses as a percent of sales, helping their profits.

Hershey, for example, reported an 18% rise in profit Thursday, helped by the lower commodity prices and a cost-cutting program launched in 2010. The gains came even as the company's revenue grew at a much slower rate of 6.7%. The chocolates maker also boosted its earnings forecast for the rest of the year.

"We are getting a bit more productivity," Chief Financial Officer David Tacka told investors.

Industrial companies also are benefiting, including General Electric Co., GE +0.98% where profits inched higher despite lower revenue. "We are purchasing our materials and our equipment from our suppliers on the same type of item at less per unit this year than last year," GE Vice Chairman Keith Sherin said in an interview, citing lower prices for copper, steel and aluminum as well as sourcing activity. Mr. Sherin said he expects that to continue, having shaved "a couple hundred million " of raw-material cost off in the first half.

Other companies are still able to post sales gains, which amplify the effect of lower costs. Revenue at drug maker Eli Lilly LLY +0.72% & Co. rose 6%, despite the loss of patent protection for a big-selling antidepressant. But the company cut operating costs by 2% and lowered its projected administrative expenses for the year. That led to a 31% increase in net income.

Lilly "is doing an outstanding job of just driving productivity gains that we think are sustainable across the business," Chief Financial Officer Derica Rice told investors. "These aren't one-time effects."

Analysts are divided on whether margin expansion will remain a reliable source of earnings growth. Tony Dwyer, U.S. portfolio strategist for Canaccord Genuity, says profit margins will continue to widen unless revenue drops, because companies are keeping expenses in check. "Margins should do pretty well," he said.

But Howard Silverblatt, senior index analyst for Standard & Poor's, questions whether margins will continue to increase.

"I don't know how many more people you can get rid of," he said. "You cannot continuously cut to get your way out."

Pretty remarkable considering they've been growing 900% a year for a while now.

thank you satan
maybe if these companies learned to budget their finances more responsibbly this not hapen