The Lukens Puzzle

Lukens Steel Co. is a 147-year-old company, largely family-owned, that never caused much stir outside Coatesville, Pa. (pop. 15,000), where its plant is the mainstay of the community. But in recent months in Wall Street, Lukens Steel has become not only a well-known but a very puzzling company. Twice in the last fortnight the New York Stock Exchange has had to suspend trading in Lukens stock--first because of a rush to sell, later because of a scramble to buy. Last week the Stock Exchange and the Securities and Exchange Commission stepped in to see what was happening to Lukens.

The gyrations in Lukens stock began when President Charles Lukens Huston Jr., 50, was quoted by the Wall Street Journal as saying that the company's first-quarter earnings would be "equal to, if not better than" 1956 average quarterly earnings of $1.97. Since word had been making the rounds in Wall Street that Lukens' per-share earnings might be as high as $5, this was interpreted as pessimistic news. A deluge of sell orders forced suspension of trading, later sent Lukens stock spinning down by 7 7/8 points for the day to 65 1/8.

Last week Lukens issued its first-quarter report. To almost everyone's astonishment, it revealed that first-quarter earnings were $3.53, more than double last year's first quarter. A rush to buy Lukens stock forced another suspension of trading, later pushed the stock up 8 points to 76 3/8, made it the most heavily traded on the Exchange.

Sudden Prosperity. President Huston refused to give any explanation for his low estimate--made two days after first-quarter books had been closed--except to say that it had been "necessarily conservative." The Stock Exchange announced that it had been assured by Lukens Steel that none of the firm's directors or officers bought or sold any appreciable amount of Lukens stock between the two announcements. Since the Lukens and Huston families own nearly 40% of the outstanding 953,928 shares, the amount of stock available to the public is small.

Most of the reason for Lukens Steel's sudden prosperity was the very uniqueness that had kept it unobtrusive. A nonintegrated producer that purchases pig iron and scrap for its twelve open-hearth furnaces, it specialized in heavy steel plate, therefore cashed in on the peak demand for heavy plate caused largely by the oil tanker boom.

Nudged from the Niche. Founded in 1810 by a Quaker farmer named Isaac Pennock (whose daughter Rebecca gave her married name to the company, actually ran it herself for 22 years), Lukens has been nudged out of its modest niche by the big demand. Last week President Huston announced that the company will launch a $33 million expansion program that will boost Lukens' rated ingot capacity by nearly 25% to 925,000 tons.

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