Newspaper article THE JOURNAL RECORD

Earnings Fail to Show Turnaround in Economy

Newspaper article THE JOURNAL RECORD

Earnings Fail to Show Turnaround in Economy

Article excerpt

By Patricia Lamiell

Associated Press

NEW YORK _ U.S. companies are generally reporting respectable fourth-quarter profits compared with the soft figures of a year ago, but many industry groups are still waiting for a decisive turnaround.

Although some companies have boosted their bottom lines by cutting costs, the improvement in the economy has not yet translated into better sales. And firms doing business overseas are still feeling the pangs of a worldwide recession that has kept offshore revenues modest, analysts said.

"The improvement has been from lowering the cost of business," said Benjamin Zacks, executive vice president at Zacks Investment Research, "not from increased volume."

For example, weak international sales caused a drop in fourth-quarter sales at PPG Industries to $1.41 billion from $1.42 billion.

Cyclical companies, whose profits rise and fall with the economy, are still coping with recessionary pressures. Profits in the steel, paper manufacturing, chemical, and aluminum industries were soft in the fourth quarter.

Domestic oil-service companies were hit hard by a drop in crude prices that made it uneconomic to drill. Airlines and aircraft manufacturers were unable to rally out of a protracted earnings slump. Profits at Boeing Co., for instance, plunged to $552 million, or $1.62 per share, for the year, compared with $1.57 billion, or $4.56 a share, in 1991.

Earnings suffered in many industries because of substantial one-time charges, said James Solloway, research director at Argus Research Corp.

Many banks and financial companies continue to set aside money to cover bad real estate loans. Some companies, such as Sears, Roebuck and Co. and International Business Machines Corp., are still creating reserves for the costs of staff reductions.

And many companies took substantial write-offs for mandated changes in accounting rules. One new rule requires companies to account for retirement benefits as they are earned, rather than when they are paid. Another changes the way companies compute their taxes.

For some companies, these factors are adding up to a dismal year. …

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