Finance executives foresee declining profits next quarter

DURHAM, N.C. -- More U.S. finance executives expect corporate earnings to decline in the fourth quarter than did in the third quarter, according to a survey by Duke University's Fuqua School of Business.

Some 22 percent of U.S. chief financial officers expect profits to fall in the last three months of the year from the third quarter.

That's up from 14 percent of CFOs who predicted declines in third quarter profits in a similar survey conducted this summer. The pessimism is prompted by a slowing economy and rising consumer debt, which is likely to curb spending, some CFOs said in separate interviews. "I would expect growth but not to the extent seen in the third quarter," said Anthony Crudele, chief financial officer of Sports Authority Inc. in Troy, Mich., which operates 143 sporting goods stores in 26 states. Though 58 percent of the chief financial officers questioned predicted a rise in fourth quarter profits, the survey's authors said the results show many hints of doubt in the minds of those people who help run companies around the country. "They are not as optimistic the growth will continue," said Michael Bradley, a Duke University finance professor who co-authored the survey of 636 CFOs from Oct. 1-18 with the Financial Executives Institute in Washington. According to the survey of CFOs from manufacturers, retailers, banks and other industries, more companies expect to shed employees in the fourth quarter than did in the third quarter. Some 9 percent said fourth quarter profits will be stagnant compared with the July to September period, down from 12 percent of those surveyed this summer about the third quarter. And there were no signs more companies are planning to lower dividends or cut back on capital investment, the Duke University survey found. The third quarter was a winner for many companies, with 287 of the companies in Standard & Poor's 500 stock index already reporting higher third quarter per-share profits, compared with the same period in 1995. On average, earnings per share jumped 18.8 percent at these companies, according to Zacks Investment Research. The Duke survey doesn't jibe with Wall Street's predictions since it compares growth in profits with the third quarter. Most securities analysts and investors compare the same quarter from year to year, to weed out seasonal changes in corporate fortunes. Wall Street analysts, for their part, expect continued growth in reported fourth quarter profits compared with the same period in 1995, mainly because results were dismal last year. In the fourth quarter of 1995, many companies reported double- digit drops in earnings as the economy grew just 0.3 percent and retail sales plummeted. Companies such as Wal-Mart Stores Inc., Chevron Corp., Goodyear Tire & Rubber Co. and Caterpillar are expected to report earnings increases of 15 percent or more in the quarter, according to surveys of analysts by IBES International Inc.

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