The Test of Peace

Fearing big cutbacks when the Korean fighting ended last July, businessmen thought that the third quarter would be an important test of the U.S. boom. Last week, as more than no third-quarter reports poured forth from industry, it was clear that U.S. business had successfully passed the test. Sales were up an average of 16% from 1952, and net was up an average 20%, though profits in many cases were off slightly from the second quarter. As company after company reported good news, stock-market traders bought shares with gusto, and prices rose.

Among the first of the giants to report was General Electric, with third-quarter sales of $780 million (v. $642 million in 1952), and a 9% rise in net, to $40.9 million. Said President Ralph J. Cordiner: "We see nothing in this picture to justify the fears of recession which are being expressed in so many quarters today." G.E. directors proved their confidence by declaring a $1 special dividend; in two days, G.E. stock pushed up 1 1/2 points, topped 80 for the first time since 1930. Others in the electrical industry rolled up similar gains over 1952. Sylvania Electric's net was up 47% to $2,300,000; R.C.A. reported a 6% rise, to a net of $6,900,000.

Goal for 1954. In the chemical industry, Du Pont's sales were up 8% to $440 million, while net was put at $1.21 a share, v. $1.14. Diversified Olin Industries boosted its net 23%, to $4,000,000. Mathieson Chemical, on sales of $60 million, netted $5,000,000, or 28% more than in 1952. In the steel industry, Republic was the first big company to report, and gave a hint of things to come. Its sales were up 52% (to $292 million), and net soared 172% (to $14 million), as compared with the strike-hampered third quarter of 1952. Said Republic's President Charles M. White: "Without excess-profits taxes, without overtime and with our added productive capacity, Republic Steel should do as well in 1954 as in the current year." Allegheny Ludlum, Youngstown Sheet & Tube and fast-growing Colorado Fuel & Iron (TIME, Oct. 12) all scored net gains of more than 100%.

As oil-industry profits bubbled higher, oil shares came to life on the stock exchange. Shell's net of $30 million was up 52% from 1952 (when one refinery was closed by a strike); Phillips Petroleum scored a 23% gain. And while the Texas Co.'s earnings were only 2% higher (at $47 million), directors considered the outlook so good that they declared an extra dividend of 40-c-. Railroad stocks picked up with the news that Baltimore & Ohio, with nine-month earnings up from $18 million to $21 million, was raising its dividend by 25-c- to $1 a share. Douglas Aircraft, which chalked up record postwar sales ($632 million) and earnings ($13 million) for the first nine months, rewarded its stockholders with a $1.50 extra dividend. Consolidated Vultee's earnings were up from 64-c- to 74-c- a share.

Soap & Sports Cars. The utility industry continued its fast postwar growth. A.T. & T., which installed 400,000 new telephones in the quarter and handled more long-distance calls than ever before, netted $104 million, v. $89 million last year. Among the soapmakers, Colgate-Palmolive-Peet's earnings slipped 21% to $2,400,000, while burgeoning Procter & Gamble (TIME, Oct. 5) racked up a gain of 13%, to $14 million.

There were a few serious casualties. In the sick coal industry, Lehigh Valley Coal Corp. reported a deficit of $373,000. American Woolen, still deep in the textile industry's slump, had a deficit of $1,800,000. U.S. Lines, suffering from a drop in freight business, reported a nine-month net of $4,900,000, down $2,800,000 from last year. When directors omitted the dividend, the stock dropped more than four points to a new low for the year of 14 1/4. Kaiser Motors had a loss of $10 million for the first six months. While Studebaker's quarterly net (at $1,800,000) was more than triple last year's, the nine-month earnings were down more than 50% to $4,100,000, because of production troubles with its sporty new car. But Studebaker declared its regular 75-c- dividend, instead of cutting it as expected.

By week's end, stock traders had taken such heart at the third-quarter news that the Dow-Jones industrial average was up 2.54 to 275.34, highest since August.

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