Condition: Good & Bad

Like a boy with a bad report card, many a corporation was none too eager to carry home to stockholders the bad news of earnings for the first half of 1946. But last week, as third-quarter reports came out, there was many a yelp of joy. There were still some failures; but there were also a surprisingly large number of "Es" for excellent.

Cause for Joy. The steel industry, thanks to its 90% of capacity operation, got an E. Republic turned in a net for the first nine months of $9,494,414 (v. $7,973,927 for the same period last year). U.S. Steel's net was estimated at $24,138,541 for the third quarter, 73% better than the quarter before, and twice as much as last year. (For many big companies, this year's and last year's quarters were not comparable, since in 1945's third quarter many companies were reconverting.) In general, most other steel companies were expected to do as well.

The big food processors also won an E. Cream of Wheat's $631,549 nearly doubled its comparable 1945 earnings. Standard Brands topped last year's comparable earnings by 22%, General Foods by 16%. Sunshine Biscuit more than doubled also. So did department stores. Typical example: Gimbel Bros, had a net of some $8.5 million for the first six months, a fat 248% better than last year's first half. Up also were many utilities, pharmaceuticals, paper, containers, building products, liquor.

Cause for Alarm. Railroads, currently clamoring for an increase in freight rates, reflected the cause for alarm. New York Central was in the red to the tune of $6,623,544 for nine months, compared to a net profit of some $22 million last year. Some 15 others had skidded down also. Union Pacific tumbled from $31,316,921 for the first three quarters of last year to $18,752,495 this year. The Pennsylvania, which had predicted that it would lose $14.6 million this year, made $9,787,575 in the first nine months v. $90,667,673 last year. Chesapeake & Ohio showed a gain of 6.7% to $20,737,317. Actually, the picture was not as gloomy as it looked. Tax carryback credits will put many roads, now in the red, in the black for the year.

In the mass of companies, the results depended on whether they had been hit by strikes and material shortages. If they had not, they were likely to be way up, like Electrolux (to $2,184,329 as compared to $730,996). If they were hit, they were likely to be like Yale & Towne, with an operating deficit for the nine months of $524,450 (v. $774,237 profit). Those who had been hard hit earlier in the year were coming back. Example: after losing $5,980,179 in the first two quarters, General Electric made enough in the third to recoup the loss, cleared an even 1-c- a share.

At the extremes of the earning gamut were two companies that offered plenty of grist for the mills of economic moralists. American Woolen Co., with no big labor, material or reconversion problems, was a startling example of what an economically uninhibited company could do. In the third quarter of 1946, its profits soared to $5,375,000 some 393% over last year's comparable net. So far this year, on common stock selling at only $50 a share, earnings have been a phenomenal $36.05.

At the other extreme was Illinois Bell Telephone Co. Despite record volume and a big tax refund, it glumly reported that current earnings were down to Depression lows. Main reason: since 1940, revenues have increased 59%, wages 125%.

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