Upswing

No. 1 industrial manic-depressive is steel, which suffers more in its bad moments and has more euphoria in its good ones than the heroine of an oldtime melo drama. Out last week were the 1940 earnings reports of the five biggest U. S. steelmakers, spectacular evidence that steel is now in a dizzy upswing. After a slow start until the defense boom got under way, the big five (which lost $108,088,560 in 1932) earned $197,315,722 last year, turned some neat per-share profits.

> U. S. Steel, biggest of them all, earned $102,181,321 ($8.84 a share), highest since 1930's $104,421,571. At year's end its unfilled orders amounted to some three months' shipments; its operating rate rose last week to 100% of its theoretical capacity of 29,720,000 net tons of ingots a year.

> Bethlehem, the No. 2 company, set an all-time record with earnings of $48,677,524 ($14.04 a share), well over 1929's $42,242,980. Its year-end backlog was $1,204,100,000 (including shipbuilding orders as well as 2,229,000 tons of steel): some of it will take up to three years to run off. Bethlehem also operated last week at 100% of capacity (11,850,000 tons a year).

> Republic, organized in 1930, earned twice as much as in its best previous year--$21,113,507 ($3.30 a share) compared to 1939's $10,671,343.

> Jones & Laughlin, which swung from profits of $29.04 a share in 1929 to a $20.86-per-share deficit in 1932, swung back with earnings of $10,277,029 ($10.70 a share), highest since '29.

> National, incorporated in late 1929 (and only one of the present big five to show a profit in 1932), earned $15,066,341 ($6.83 a share), less than the record $17,801,893 it reported in 1937 but a comfortable 12% over 1939.

If the steel companies' 1940 earnings reports made good reading for shareholders, their stock quotations did not. At week's end U. S. Steel sold at 62 (seven times 1940 earnings), Bethlehem at 82 (six times earnings), Jones & Laughlin at 31 1/2 (three times earnings, depressed by $45 of arrearages on the preferred). These quotations, ludicrous by the yardstick that used to set a conservative price for common stocks at ten times earnings, reflected Wall Street's fears about the world situation, higher taxes, collapse of the defense boom. The next question investors will have to answer is: how long does a stock such as Bethlehem have to earn $14 a share to be worth more than 82?

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