EARNINGS: Extra! Extra!

Corporations yelled out their third-quarter reports last week as excitedly as newsboys handing out extras—which was just what many of them were doing. More than 100 in such varied industries as oil, machinery, mining, steel, retail sales, chemicals, distilling—and even playing cards—declared extra dividends in cash or stock. Of some 200 companies reporting for the period ending Sept. 30, only six showed deficits, though some 60 others were down from the same period last year. For most, the combination of higher prices and high production made the quarter the most profitable in corporate history.

Comeback In Rails. The oil industry, as usual, led the prosperous parade. The major companies showed increases in net profits over the third quarter of 1947 ranging from 35% for Union Oil Co. of California (to $7,043,427) to 82% for Skelly Oil Co. (to $10.6 million).

But the big surprise was the spectacular comeback of the railroads. Thanks to rate boosts which were beginning to show their full effects, railroads, notably in the East, were having their best peacetime year since 1929. For the first nine months of the year, the New York Central netted $13.1 million, compared with less than $452,000 in the same period last year. The Baltimore & Ohio was up about 200% (to $16.5 million), the Erie 210% (to $9.7 million). The Pennsylvania, which lost more than $7,000,000 in the first nine months last year, made the best gain: it showed a 1948 profit of $17.5 million.

Bogged-Down Trucks. For companies whose profits were down, the cause was generally 1) high-priced inventories at a time when prices were dropping or 2) a shift to a buyers’ market, which cut sales. Colgate-Palmolive-Peet, for one, reported a third-quarter net of $3.1 million (v. $5.3 million last year) on lower sales. Standard Brands showed a profit of only $787,519, a drop of 49%. With sales slipping, five out of eleven makers of electric appliances reported declines ranging from 2% (for Noma Electric) to 43% (for Bendix Home Appliances). Truckmakers Diamond T and Autocar slipped badly and Reo Motors drove into the red.

Radiomakers, who had seen sales plummet, were saved—and then some—by television. Typical example: on a sales rise of 41%, Philco boosted its earnings 51% to $2.4 million.

Gold-Plated Steel. In steel, every major company’s profits were up, in many cases to new highs. Like Republic Steel a week earlier, Bethlehem reported the best quarterly net in its history; it was up 121% to $22.5 million. U.S. Steel, which made news chiefly by not declaring an extra dividend (which Wall Street had hoped for), trailed with a rise of 20% to $34.5 million. But Big Steel’s net did not tell the whole story. Because its depreciation reserves “were not sufficient to cover the cost” of replacing property at current high prices, the company had put aside an extra $13.5 million. Without this set aside, the profit increase over 1947’s third quarter would have been closer to 70%. Similarly, high costs were forcing many another big or growing company to apply more profits to reserves (even though the net working capital of U.S. corporations, as reported by SEC last week, reached a record high of $63.9 billion at the end of the second quarter).

For many companies, operating costs were still rising as fast as sales, or faster. Westinghouse Electric Co. could not keep up. Sales were up 8% to a peacetime peak, but profits dropped 48%. A notable exception: General Motors, due partly to inventories bought at lower prices, boosted third-quarter profits 60% to a record $120.3 million on a sales rise of 27%.

Nevertheless, costs were still high enough to pinch big companies and perhaps squeeze out smaller ones if sales dropped only a little. But Willys-Overland’s President James D. Mooney, for one, was not worried. He said Willys had doubled its net in 1948 compared to 1947, and had trimmed ship enough to stand a blow. As his Jeeps and Jeepsters “only require a modest part of the market,” he confidently declared that “there could be quite a lot of general business recession without our feeling it.” No one else seemed to be giving a recession much thought. The prospects for most businessmen were sized up by Standard & Poor’s Outlook: “Profits will establish a new record this year, and the prospect [is] that 1949 will be another highly prosperous period even though earnings may not quite equal those for the current year.”