A Tale of Two Corporate Trends in Today's Economy

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Two different trends are emerging when it comes to how companies are faring in the current economy. Banks, builders and airlines are getting clobbered by the credit crunch and soaring energy costs. But farflung companies from Boeing to McDonald's are doing well, thanks to growing exports.


The earning power of U.S. corporations is affected by the economic downturn, the weak dollar, the credit squeeze, all sorts of things. But companies are affected in different ways. Some corporations are hurt by a slowdown at home and simultaneously helped by strong growth abroad. Over the past week, many companies have been reporting their earnings for the first three months of the year.

NPR's Jim Zarroli joins me now to talk about whether we're seeing any trends here. Hi, Jim.

JIM ZARROLI: Hi, Robert.

SIEGEL: It sounds like Ford managed to cut its way to a quarterly profit, but I gather there are other companies that are doing well without having to cut.

ZARROLI: Well, if you look at the Fortune 500 companies, 136 have reported their earnings for the first quarter as of this morning. Considering that a lot of people think that we officially entered a recession last quarter, it really turned out to be a fairly good quarter, with one exception and that is banking, banks suffer because of the credit crunch and the mortgage downturn, of course. One example, Bank of America said its earnings were down 77 percent. More people are missing their home loan and credit card payments was the reason that the bank cited. But if you leave banks out, corporate profits are up, so far anyway, 9.2 percent.

SIEGEL: Are people saying today that maybe the economy is doing better than we thought.

ZARROLI: Well, I think some people are saying that. But there are some caveats. One of them is, of course, you know, we always say this is a global economy and this is where we see a perfect illustration of that. Many big U.S. companies get a lot of their revenue overseas. McDonalds, DuPont, 3M, they all say they've managed to pull through because their overseas sales have become so strong. Not only is the economy stronger in Europe, in Asia, the Middle East which benefits companies like Boeing, but you also have the weak dollar. I mean, if you're a company like 3M which makes two-thirds of its revenue overseas, well, that money comes back to the United States in Euros, Yens, Pounds and that looks pretty good on the balance sheet.

SIEGEL: Now oil, a barrel of oil was selling for $100 on January 1st - today, it's $116, it's a big increase, how is that affecting these companies?

ZARROLI: Well, it is having a big effect both positive and negative on airlines, for instance. Take a look at the airlines, they're almost all losing money, and it's not because people aren't flying, they are. U.S. airways, for instance, said per-person revenue rose 4 percent during the quarter from that quarter the year before, but fuel costs are just through the roof. Lots of other companies say they've been affected by energy costs - UPS, Dow Chemical, of course, there are the oil companies which have tended to do well. Konica, Philips, for instance, said its revenue was up 17 percent.

SIEGEL: And what are the major disappointments? Which companies have reported and had surprised folks on Wall Street on how poorly they did?

ZARROLI: Well, General Electric was the big disappointment. The CEO, Jeffrey Immelt, came out and said the company's profits were a lot lower than he expected. He cited the weak U.S. economy. Also Starbucks, which has been growing like a tropical vine over the years, it basically said there's been sharp slowdown in store traffic, and that it would have to close some of its underperforming stores

SIEGEL: Okay Jim, thanks.

ZARROLI: You're welcome.

SIEGEL: That's NPR's Jim Zarroli in New York.

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