Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, January 6, 1993 TAG: 9301060039
SECTION: BUSINESS PAGE: A3 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
PROFITS OUTPACE ECONOMY
As corporate number-crunchers finish toting up 1992 earnings, it appears many companies will report respectable fourth-quarter results despite lingering economic weakness.The fate of a few cyclical companies, whose fortunes rise and fall with the economy, improved in the latter days of 1992. Sectors such as retailing are expected to have good news during the next six weeks when they report fourth-quarter earnings.
A rebound in the banking business could be the year's biggest turnaround story.
But some other industries deeply dependent on economic conditions, notably automakers, haven't turned the corner. Their fourth-quarter totals are expected to be grim.
Fourth-quarter figures also are expected to show that plant closings, layoffs and other cost cuts associated with recent corporate restructurings have begun to pay off.
Those who track corporate profits say fourth-quarter results, in general, will put the finishing touches on a satisfactory year.
"Corporate profitability ended the year better off than was widely expected at the start of the year and at midyear," said Clare Zempel, chief economist at Robert W. Baird & Co. in Milwaukee.
More than ever, analysts will have to read between the lines to get a complete picture of corporate performance. Operating income rather than after-tax earnings will be the focus of attention because the numbers will be skewed by one-time charges that scores of companies are taking to comply with new accounting rules.
"If I look at operating earnings, I think 1992 will turn out to have been a good year," said Hugh Johnson, chief economist at First Albany Corp. "Earnings are actually doing better than the economy."
While the overall economy probably grew around 2 percent last year, corporate net income increased about 8 percent, Johnson estimated.
Bill Stromberg, a vice president at T. Rowe Price Associates Inc. in Baltimore, said companies relying on operations in Europe and Japan for a large share of their income could have less robust balance sheets because of spotty economic showings in those parts of the world.
The earnings season will deliver few surprises. Conspicuous money-losers such as airlines and automakers continued to perform poorly in the fourth quarter. Many cyclical companies geared to consumers - with the exception of retailers - probably didn't chalk up much earnings growth.
Significant income improvements probably won't come until later in basic industries such as steel and aluminum, chemical producers, paper and forest products, heavy machinery, trucking companies, railroads and pollution control companies.
Non-cyclical categories of companies, including food and drinks, pharmaceuticals and tobacco, are expected to show further moderate growth in the fourth quarter.