Golden Flood

As the outpouring of first-quarter earnings hit their flood last week, they washed up a few surprises. Biggest surprise was that many companies made more money this year than in the vintage year of 1944. despite a wide shift in war orders and increasing operating costs. The National City Bank of New York, totting up the returns of some 310 companies, reported that net profits, after taxes, were up a respectable 6% for the quarter.

Surprise No. 2 was the newly acquired Midas touch of the airlines. Thanks to the Army, which returned 251 planes, the airlines finally had enough equipment to cash in heavily on the war-booming traffic. Eddie Rickenbacker's Eastern Air Lines led the parade with a 150% increase in net profits: $446,091 v. $178.520 last year. United Air Lines was right on its tail; in the busiest first quarter in its history it netted $1,643,288 (v. last year's $1.110,083). American Airlines, likewise bragging of its heaviest traffic ever, cashed in to the tune of $980,643 (v. $597,796). For many another company, the explanation of the golden showing was entirely different. It was due less to any huge increase in volume than to the fact that most companies have stopped tucking away cash for reconversion, postwar expansion, etc.*They have already put away all they think they will need.

Typical example was General Foods Corp. It edged up its sales to $86,669,614. best first quarter in company history. Its profit went up also to $3,785,822 (v. $3,458,800). But its profit was up partially because it did not set aside some $400.000 in its postwar fund as it did last year.

In any case, profits from war production were approaching the Great Divide in the first quarter. The long climb which had carried earnings steadily upward in the booming war years was leveling out (see chart). As the V-E day cutbacks in war production melted away the once mountainous backlogs, war profits would drop too.

Last week, the Packard Motor Car Co. showed how big the drop may be. Some of its cutbacks arrived in time to affect first-quarter earnings. Result: earnings dropped to $655,420 from last year's $1,085,989.

*Which also sent stockholders' dividend payments up 6% to $482 million, in 1945's first quarter.

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