Many of the Washington area's major public companies reaped solid profits in the first quarter of 1999, with leaders noticeable in the housing, technology and financial industry sectors.
Of the the 103 publicly traded companies on The Washington Post quarterly earnings scorecard, 57 reported higher profits in the first quarter of 1999, compared with the first three months of 1998. Forty-six of the companies had double-digit percentage gains or better, with America Online Inc., NVR Inc. and Ryland Group Inc. among the biggest gainers.
On the flip side, 22 of the companies in The Post survey suffered losses, including aerospace contractor Lockheed Martin Corp. of Bethesda and several smaller technology firms. And another 16 reported that they made less money in the first quarter of 1999, compared with the same period in 1998.
As usual, some profit reports simply reflect bookkeeping strategies or one-time events that don't reveal operating realities.
But the first-quarter results also brought to light the success stories of some firms that have been capitalizing for many months on a strong economy, a merger-friendly stock market or solid competitive footholds in their fields. The question is, how long will these good times last?
NVR, the McLean-based holding company for Ryan Homes and NV Homes and the Washington region's largest builder, was among the leaders in earnings growth, as in the two previous Post quarterly earnings scorecards. A region-wide housing boom helped put the Ryland Group Inc. of Columbia among the earnings leaders again.
But for the housing and banking industries, the good news in the first quarter may not last too much longer if interest rates on mortgages continue to rise, analysts warn.
First Virginia Banks Inc. in Falls Church was among the area financial institutions posting strong earnings gains in 1999's first quarter, still basking in the glow of favorable lending spreads and home refinancings. But higher interest rates will slow refinancing and squeeze bank profits, said Arnold Danielson, a Rockville banking analyst. "Nobody expects things to fall apart," he said. "But bank stocks are down tremendously and a lot of that is because [profit] margins are narrowing."
For AOL, the nation's largest online service provider, the first three months of 1999 produced another banner quarter, with earnings up 200 percent, compared with 1998's first quarter.
Federal, state and local spending on technology services generated a rich stream of profits for several area firms, including American Management Systems Inc. of Fairfax, and Maximus Inc. in McLean.
Sunrise Assisted Living Inc. of Fairfax continued the expansion of its assisted-living facilities for seniors and remained one of the region's strongest earnings performers for the third quarter in a row. Sunrise earnings increased 458 percent, apparently unaffected by a negative government report about care problems in the assisted living industry that drove Sunrise's stock price down sharply this winter.
For some acquisition-minded companies like Sunrise, a steady, predictable chain of quarterly growth is a key to maintaining high stock prices, the fuel the keeps expansion going.
But for other companies, earnings gyrate quarter to quarter because of one-time windfalls, or because a good quarter has followed a poor one the year before.
Comsat Corp. in Bethesda, the first-quarter earnings of which were 208 percent above the same period in 1998, did get a boost from growth in its satellite-based Internet traffic. But the biggest contributor to its earnings gain was the sale of a subsidiary.
At the opposite end of the list, the 78 percent decline in earnings reported by The Washington Post Co., between the first quarters of 1998 and 1999, occurred because a $163 million one-time gain last year disrupted the year-to-year comparison. If the 1998 sale of The Post's interest in another publishing concern were excluded, The Post company's profit would have been essentially unchanged.
"We are not at all interested in quarterly results (and we can guarantee they won't present a smooth or predictable pattern of any kind). . . . We are willing to lose money this year if we believe we'll profit in the future from the investment," Post executives said in their 1998 annual report.
Looking ahead, one key profitability indicator for a service-dominated economy like this region's will be what happens to wage demands, said Steven Wieting, an economist at Salomon Smith Barney Inc.
Many companies got a list in the first quarter because labor costs didn't rise as much as economists had expected.
"Productivity trends are positive and everybody's working hard," Wieting said.
"That was a very big surprise and it's very questionable whether that will continue" in the second half of 1999, he added. "If inflation expectations rise, we'd expect wage demands to increase too."
And with rising wage demands could come sagging profits.
Quarterly Earnings Scorecard
Most Washington area companies have reported their first-quarter earnings, and here is a look at how some of the region's largest companies fared. Figures are for net income in millions, including one-time charges or one-time gains, which are noted. In some cases, when companies posted losses, percent changes were not measurable. Percentage change compares the first-quarter of 1999 with the first quarter of 1998.
Company $ Quarter Percent change
Advanced Communications $1.6 95%
AES Corp. - 13.0 NM
Allied Capital Corp. 18.6 - 42%
Allied Research Corp. 1.3 - 43%
America Online Inc. 117.0 200%
American Management Systems Inc. 15.8 76%
Atlantic Coast Airlines Inc. ** 3.2 6%
Axent Technologies Inc. ** - 2.3 NM
Baltimore Gas and Electric Co. 86.2 7%
Black & Decker Corp. 39.2 NM
BTG Inc. 2.0 NM
Building One Services Corp. 14.7 188%
CACI International Inc. 3.6 15%
Capital One Financial Corp. 82.4 25%
Carey International Inc. 1.7 77%
CarrAmerica Realty Corp. 54.9 13%
Charles E. Smith 25.4 23%
Residential Realty Inc. *
Choice Hotels International Inc. 10.3 26%
Ciena Corp. 1.6 433%
Columbia Energy Group *** 150.4 2%
Comsat Corp. *** 12.0 208%
Condor Technology Solutions 3.0 NM
Cort Business Services Corp. 6.9 11%
Coventry Healthcare Inc. 8.3 77%
Criimi Mae * 19.6 30%
Crown Central Petroleum Corp. ** - 11.8 NM
CSX Corp. ** 26.0 - 72%
Danaher Corp. 55.2 25%
Dominion Resources Inc. - 116.3 NM
EIS International Inc. 0.62 - 38%
Fairchild Corp. 0.69 NM
Fannie Mae 924.9 12%
Federal Realty Investment Trust * 23.7 11%
First Virginia Banks Inc. *** 44.3 40%
Freddie Mac 513.0 30%
Friedman, Billings, Ramsey - .045 - 100%
Gannett Co. 178.9 12%
General Dynamics Corp. 265.0 223%
Global TeleSystems Group Inc. ** - 162.2 NM
Government Technology Services Inc. - 1.9 NM
GRC International Inc. *** 1.3 - 66%
Group 1 Software Inc. 1.8 52%
GTS Duratek Inc. 1.8 NM
Hagler Bailly Inc. 1.2 - 25%
Hanger Orthopedic Group Inc. 3.1 84%
Harman International Industries 12.8 - 15%
Host Marriott Corp. 117.0 38%
Host Marriott Services Corp. - 4.8 NM
ICF Kaiser International Inc. - 27.0 NM
Lafarge Corp. - 29.1 NM
LCC International Inc. - 1.9 NM
Legg Mason Inc. 26.1 13%
Life Technologies Inc. 10.1 22%
Lockheed Martin Corp. ** - 87.0 NM
Marriott International Inc. 100.0 12%
Maximus Inc. 6.7 86%
McCormick & Co. 18.2 12%
MedImmune Inc. 28.8 118%
Mercantile Bankshares Corp. 37.2 5%
Meristar Hospitality Corp. 54.0 13%
Meristar Hotels & Resorts Inc. 1.5 NM
Metrocall Inc. - 46.0 NM
Micros Systems Inc. 7.7 31%
Mid Atlantic Medical Services Inc. 5.9 - 12%
Mills Corp. * 21.3 9%
Mobil Corp. ** 464.0 - 34%
Network Solutions Inc. 4.8 134%
Nextel Communications Inc. ** - 485.5 NM
Norfolk Southern Corp. 112.0 - 52%
NVR Inc. 26.0 140%
Orbital Sciences Corp. - 15.9 NM
Owens & Minor Inc. Holding Co. 5.5 0%
Potomac Electrice Power Co. 26.0 247%
Primus Telecommunications - 25.2 NM
Provident Bankshares Corp. 10.3 11%
PSINet Inc. - 58.7 NM
Reynolds Metals Co. - 10.0 NM
Riggs National Corp. 7.7 - 51%
Rouse Co. * 61.2 6%
Rowe Companies 3.1 19%
Ryland Group Inc. 10.1 116%
Saul Centers Inc. * 7.9 7%
Sinclair Broadcast Group Inc. - 1.6 NM
SLM Holdings Corp. 113.8 - 18%
Snyder Communications Inc. ** 14.5 NM
Software AG Systems Inc. 5.4 0%
Spacehab Inc. - 0.54 NM
Startec Global Communications Corp. - 13.8 NM
Strayer Education Inc. 6.2 15%
Sunburst Hospitality Corp. ** 0.81 15%
Sunrise Assisted Living Inc. 7.2 100%
T. Rowe Price Associates Inc. 53.0 29%
The Washington Post Co. 45.2 - 78%
U.S. Foodservice 16.5 NM
U.S.A. Floral Products Inc. 4.0 1%
United Payors & United Providers 5.6 27%
Universal Corp. 29.4 - 7%
US Airways Group Inc. 46.0 - 53%
USEC Inc. 16.2 NM
U.S. Office Products Co. - 97.5 NM
Washington Gas Light Co. 64.8 21%
Washington Homes Inc. 3.1 454%
Washington Real Estate 12.9 6%
Investment Trust *
SOURCE: Company reports.
* REIT earnings are funds from operations
** Includes one-time charge
*** Includes one-time gain
NM = Not Measurable