Wait & See

Most U.S. businessmen still don't know for sure whether 1943 has been a good year for them. So far it has been--but they know they must wait for the year end to see where they really stand. Well knowing that quarterly comparisons in wartime are almost meaningless, they nevertheless watched quarterly earnings reports last week, looking for clues. The National City Bank's earnings report for 275 big corporations, released last week, showed income after taxes for the first nine months of 1943 up 13% over last year (for the third quarter alone the increase was 7%). Although the nine-month figure was still 21% under the bonanza 1941, the totals made fine political talk for labor's new drive over the half-dead body of the Little Steel wage formula (see p. 17). Main reasons for not rejoicing yet:

> Comparisons with 1942 have been distorted by the fact that during last year most companies consistently overestimated taxes before the tax bill finally went through. Thus their first three quarters' earnings were understated, while the final quarter looked much fatter than it really was. And conversion problems earlier in the year also gave the year-end quarter a lopsided advantage.

> Similar 1942 tax uncertainties caused most statements to underestimate credits due from the postwar refund of the excess-profits tax. And while businessmen have been putting away tax reserves for this year at the actual 1942 rate, Congress is considering increasing excess-profits taxes from 90% to 95%, leaving the postwar refund at 10%.

> Practically all 1943 earnings are still subject to renegotiation--though a few big giants took whopping reserves in advance of trouble. Most startling example: General Motors, which set aside a $20.7 million renegotiation reserve for the third quarter, despite having already voluntarily kicked back about $57 million in price reductions, still came through with a $40.1 million net income, 10% above last year.

If all these ifs and buts combine to reduce final quarter earnings well below 1942's inflated December period, earnings for the full year may be no higher than last year's. This would be no great shakes, considering that production is up almost 20%, retail sales 12%. Up to now, most U.S. corporations have adopted this cautious view--at least toward their stockholders. According to a New York Stock Exchange study of the nine-month dividend records of 842 listed stocks, 135 paid more than last year, 369 paid the same, 145 paid less (or nothing at all). The sum total of all dividend payments was only .5% higher.

This file is automatically generated by a robot program, so reader's discretion is required.