Over the Fence

During the current shakeout of the U.S. economy, worried businessmen have anxiously waited for first-quarter earnings; they would be the Scoreboard that would show how well--or how badly--business was batting. Last week, as the first big batch of earnings came out, the scoreboard looked almost as cheerful as a home run in a tight game with the bases loaded. So far, at least, business was batting well: the slump had not been bad.

In fact, for a good half of the 175-odd companies which had reported by early this week, there had been no recession; they turned in earnings that were even higher than in 1948's fat first quarter. A notable example was Republic Steel, first of the big steel companies to report. It had a 60% jump in its net profit, from $9.1 million to $15.2 million. Another example was General Electric Co. Despite a slump in the sale of appliances and an industrywide wave of price-cutting, G.E. boosted its first-quarter net to $26.7 million (up $1.3 million).

In the light of this, G.E. had no intention of pulling in its horns. To show stockholders at the annual meeting in Schenectady how the company was expanding, President Charles E. Wilson took them on a tour through G.E.'s new $30 million turbine plant, the world's biggest, showed off some of the products.

G.E.'s competitors had not done so well. Westinghouse's net dropped $2.2 million to $10,866,921. Apex Electrical Mfg. Co. slipped from a $493,836 net into a $381,261 deficit, and other appliance makers felt that the worst was still to come.

Pleasant Thoughts. International Business Machines Corp.'s spry old President Thomas J. Watson, whose favorite motto is "Think!", gave his stockholders something pleasant to think about: a 16% gain in profits, to $7.8 million. Caterpillar Tractor Co., cashing in on long-deferred roadbuilding, bulldozed its own net from $2.9 million to $4.7 million--a gain of 63.9%.

Among the food companies, Corn Products Refining Co. led the parade by more than doubling its profit--to $3,314,562. But General Foods probably gave a better indication of the general trend. Its gross was up slightly to $127,802,860, but rising costs cut its net from $8,155,176 to $7,593,797. Even the airline and aircraft industries, which had long been ailing, were perking up. Prime example: Douglas Aircraft Co., which had earned only $23,862 in 1948's first quarter, this year earned $2 million, the result of rearmament contracts and a cost-cutting campaign. American Airlines, which lost $4.2 million in the 1948 quarter, cut its loss to $222,521.

Though the housing boom was past its peak, the building industry showed some outstanding performers. Johns-Manville Corp. boosted its net 24.9% (from $2.3 million to $2.8), Libbey-Owens-Ford Glass Co. 23.4% (from $3.1 million to $3.8), and Pittsburgh Plate Glass Co. 17%. Small Pennsylvania-Dixie Cement Corp. showed a 171% rise (to $325,410).

Some industries, notably textiles and paper, showed a sharp drop. American Woolen Co.'s profits slumped from $4.8 million to $1.4 million, Industrial Rayon Corp.'s from $2.9 million to $2.2 million. Of eleven paper companies reporting, only one showed an increase: St. Lawrence Paper Mills, up 24%. The biggest drop was that of St. Regis Paper Co., from $4.4 million to $2.2. The oil companies found that a surplus in most of their products also meant lower profits. Of seven big companies, only Barnsdall Oil showed a gain (from $3.3 million to $3.6), while Shell Union Oil Corp.'s profits fell from $28.9 million to $21.4 million.

Plagued by a bad winter, some of the railroads had not done too well. Union Pacific's net dropped from $12.4 million to $2.8 million. The gross of the Chesapeake & Ohio, hit by the coal holiday, was off by 6.32%. But by trimming expenses the C. & 0. managed to boost its net from $4.3 million to $5.4 million.

Standoff. All in all, as U.S. .business entered its second quarter, the profit picture was a lot better than most businessmen had dared hope. Wall Street's gloomy trend-watchers, who had been shaking their heads in anticipation of huge "inventory losses," found little evidence of them as yet. Many companies had either trimmed inventories in time or, if vulnerable to such losses, had set up reserves to meet them (e.g., Colgate-Palmolive-Peet Co. had charged off $4.2 million from its 1948 profits to absorb such declines, still had another $3 million in reserve).

The stock market, perverse as ever, responded to the good earnings--and a scattering of extra dividends--by sagging a little lower. Wall Streeters now chirped that the market was "discounting" 1949's first quarter, on the ground that it would be the best that 1949 would see.

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