Corporate earnings shed light on how economy is faring


Wall Street’s “Charging Bull” is seen in this file photo. Tuesday is a big day for earnings announcements which will give investors important clues about how the economy is faring. (MARY ALTAFFER/ASSOCIATED PRESS)
October 16, 2012

Tuesday was a big day for earnings announcements, with companies from McDonald’s to Goldman Sachs to IBM reporting how their third quarters went.

This being the presidential election season, there’s greater interest in the monthly jobs figures than how many burgers McDonald’s sold this summer, but these earnings reports often contain important clues about how the economy is faring.

Below are three bellwether companies that announced results Tuesday:

CSX — Railroads move not only coal but construction materials, autos and commodities such as corn, making them good indicators for a number of other industries. Results for this quarter were slightly down compared to last year, with revenues dipping 2 percent. According to details in its filing with the Securities and Exchange Commission, CSX saw the volume of automotive shipments jump 17 percent last quarter compared to 2011. The rail firm said that North American light vehicle production rose because of pent-up demand from consumers whose cars are aging. But CSX suffered from a drop in the volume of agricultural shipments. The company cited the “extreme drought in the Midwest” as the biggest reason.

Intel — The world’s biggest maker of chips for personal computers is a favorite bellwether for the tech industry. The company not only withstood the economic downturn, but it also generated quarter after quarter of record profits last year. But the PC market has begun to slow, and it’s showing in Intel’s results. The company reported $13.5 billion in third-quarter revenues, 5.4 percent lower than last year. In particular, revenues from its PC client group suffered, dropping 8 percent compared to 2011. “Our third-quarter results reflected a continuing tough economic environment,” said Paul Otellini, Intel’s president and chief executive, in a statement. Analysts have wondered whether some consumers are holding off on PC purchases because Microsoft is about to unveil its new operating system, Windows 8.

W.W. Grainger — This company may not be widely known, but it supplies everything from batteries to office furniture for 2 million businesses and institutions in 157 countries. When Grainger does well, it’s a sign that businesses are being less stingy. In the third quarter, Grainger’s revenues totaled $2.3 billion, an 8 percent increase from last year. Profits dropped, largely because the company set aside a reserve to cover a proposed legal settlement with federal government agencies. Otherwise, net earnings would have risen 11 percent compared to 2011. Sales in the United States were fairly strong, rising 4 percent. The company said there was “solid sales growth” with manufacturing, government and retail customers.

Jia Lynn Yang is a staff writer at The Washington Post who covers policy and business. Before joining the Post, she worked at Fortune magazine.
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