Earnings in the Dip

Out came a batch of earnings reports last week for the fourth quarter of 1957, the first quarter of the dip. The trend in most cases was downward, but like the economy itself, the reports added up to a mixture of good and bad. Even in cases where fourth-quarter earnings fell, the fall was often not great enough to prevent the company from totting up record earnings for the year.

The hard-hit steel industry, operating at only 55-4% of capacity, was down from the record quarter a year ago when it was still making up for strike losses in output. U.S. Steel, while running up record profits for the year, noted a fourth-quarter drop in earnings to $1.56 per share from $1.83 the year before. Republic Steel's net fell in the last quarter to 77-c- a share from $2.22 a year earlier, though the company turned its best earnings year since 1955. On the other hand, Bethlehem Steel rang up record yearly earnings, partly on the strength of an increase in fourth-quarter earnings over the third quarter (but below a year before), and Youngstown Sheet & Tube Co. also managed to raise its fourth-quarter earnings.

Down & Up. Other industries presented an equally mixed picture. Copper was hard hit (see Industry). Southern Pacific Railway nudged its net up for the year with the help of a fourth-quarter rise in the oil industry, a 32% cut in Jersey Standard's fourth-quarter net (to 71-c-, v. $1.04 a year earlier) gave the world's biggest oil company its first yearly earnings dip in five years. Healthy fourth-quarter gains were run up by International Business Machines ($2.17, v. $1.86 in 1956), which had a record profit year, and Westinghouse Electric Corp. ($1.11, excluding a special tax refund, v. $1.07). Though the earnings trend was down, such surprisingly strong showings in the face of the business slump gave hope to investors that in 1958's first quarter, many companies may feel the recession less than expected.

Long & Short. More pessimistic were six economists who testified before the Congressional Joint Economic Committee last week that the recession may not be as short-lived as many people hope. Said Professor Jewell J. Rasmussen of the University of Utah, summing up the group's sentiment: "The possibility of a recession of the more serious type appears to be much greater now than in 1949 or 1953-54," because pent-up demand has been filled. But there was no such agreement among businessmen themselves. The steel industry, in fact, is cautiously optimistic, feels that it has reached the bottom. Said Arthur B. Homer, president of Bethlehem Steel: "Sizing up all the factors, I've felt better about things in the last week. We see some signs already that may mean we will be at a better rate soon. When people regain confidence, when they decide the turn has come, we'll come back fast."

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