Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, October 21, 1995 TAG: 9510230113
SECTION: BUSINESS PAGE: A-8 EDITION: METRO
SOURCE: Bloomberg Business News
DATELINE: NEW YORK LENGTH: Medium
Many U.S. companies are reporting strong third-quarter earnings, surprising shareholders and executives who expected business to slow as the economy decelerates. About 55 percent of 261 companies in the Standard & Poor's 500 that have reported third-quarter earnings beat expectations.
Shareholders and corporate treasurers are happy - and a little stunned - that the robust profits fueling a yearlong stock market rally have yet to fade. Many expected a retreat after the Federal Reserve raised overnight bank loan rates seven times in the 12 months beginning February 1994 to prevent the economy from overheating.
``Lo and behold, what we find is the earnings continue to be there,'' said Timothy Morris, chief investment strategist at Bessemer Trust Co., which manages about $10 billion.
One reason is that companies are keeping costs under control, which improves profit margins. Another is that Fed Chairman Alan Greenspan accomplished a difficult two-step policy goal of raising rates enough to control inflation, while keeping the economy growing at an annual rate of about 2.5 percent, below last year's 4.1 percent.
Changes in corporate profits can lag a shift in economic growth by three or four quarters, economists said. But the last half of 1994 was exceptionally strong, which would make for unflattering year-to-year profit comparisons.
Instead, many businesses are thriving because they moved to cut production and limit labor costs soon after the Fed started raising rates, said Mickey Levy, chief financial economist at NationsBanc Capital Markets Inc.
Cost reductions not only helped businesses, they contributed to lower inflation, Levy said. ``This is one of the key factors that has driven the stock market and kept yield spreads narrow between corporate bonds and Treasuries,'' he said.
Reported earnings include:
CSX
CSX Corp., Richmond-based transportation and real estate company with operations in Western Virginia, reported net earnings of $202 million, or $1.92 per share, on revenues of $2.67 billion, compared with year-earlier $177 million, or $1.68 per share, on revenues of $2.47 billion. For nine months, net earnings were $342 million, or $3.25 per share, on revenues of $7.73 billion, compared with $413 million, or $3.94, on revenues of $7.07 billion.
Signet Banking
Signet Banking Corp. reported third-quarter earnings of $30.1 million, or 50 cents a share, compared with year-earlier $3.5 million, or 5 cents. Results for 1994, however, included special charges as well as the earnings of Capital One Financial Corp., a credit card bank that was spun off to shareholders Feb. 28.
Excluding both factors, Signet's third-quarter income rose 15 percent from $26.3 million and earnings per share were up 11 percent from 45 cents.
Loans grew 3 percent from the prior quarter. Additions of $114 million of student, installment and home equity loans fueled a 4 percent increase in the consumer portfolio in the three-month period. Signet said it continued to de-emphasize commercial real estate lending, and that category declined 3 percent to $643 million from June 30.
At the end of the last quarter, Signet had loans of $5.8 billion and deposits of $7.2 billion. Assets were $10.7 billion.
Federal Mogul
Federal Mogul Corp., Southfield, Mich.-based operator of an engine bearings plant in Blacksburg, reported third-quarter net earnings of $11 million, or 25 cents per share, on sales of $480.2 million, compared with year-earlier $16.1 million, or 37 cents, on sales of $445.3 million. For nine months, earnings were $39.4 million, or 91 cents, on sales of $1.51 billion, compared with $51.5 million, or $1.19, on sales of $1.38 billion.
Tultex
Tultex Corp., Martinsville fleece-wear maker with plants in Roanoke, Bland and Smyth counties, reported third-quarter net income of $9.2 million, or 30 cents per share, on sales of $207.9 million, compared with year-earlier $7.4 million, or 24 cents, on sales of $208.9 million. For nine months, Tultex reported a net loss of $2.6 million, equal to 11 cents per share, on sales of $413 million, compared with a year-earlier net loss of $548,000, equal to 5 cents per share, on sales of $397.1 million.
by CNB