The Wilmington morning star., 1943-09-10
BY ROGER BABSON
BABSON PARK, Mass.

6AbSON Z AIM, hdSS. A>oN
that we have entered the fourth
quarter of the year, it is time tt
look ahead to what the year-enc
results will show for certain i'm
portant industries. What has al
ready happened in these groups
and what may happen in them in
the near future can be a practical
gauge to the trend we may ex.
pect of business and employment
in general. Let us consider few
leading industries.
Railroads: These have been the
zeal war babies. Traffic con-
tinues at peak levels and operat-
ing efficiency remains high. Net
earnings. however. have probably
reached a peak. Taxes are catch
ing up and fewer railroads have
a tax sheltered division Wage in
creases are another big uncertain
~. Some selected rail securities
may still have a way to 60 but
my advice is not to over-hang the
market
Autos: The major manufactur
ing companies may continue their
war work for some time to come.
l expect. though. to shortly see
the smaller automobile companies
re-convert to civilian needs. Auto
mobile stocks have generally per-
formed better than the market
average. Finarces are strong.
Long range earnings prospects are
good: but a conservative attitude
IS justified in this group.
.Airplanes: Forget the nlanufac-
turing companies and count on the
air transport companies. Advances
il the stocks of these companies
have. however. already seen large.
The industry is basically sound,
but much new capital will have
10 be raised. Hence, watch out
for diluted equities. The peak of
wartime earnings h probably
been reached.
Building: BY the year-end we
shall probably see a decrease in
building of more than 80 per cent.
This applies mainly to heavy en-
elneering construction for war re-
qui1ements. Heavy construction is
expanding abroad. but will in no
respect equal what was built in
this country. Post lr outlook for
the industry is exec. e: = There is
a tremendous backlog accumulat-
ing for new housing. Building ma
terial investments should be OK.
Steel: Steel companies are un-
der the pressure of continued
call for more prod Sction and
steadily rising trend of operating
costs. Recent coal strikes have
tunnage Overtime w a ge pay
ments have been costly and most
companies are showing lower prof
it's before taxes. In relation to
current earnings and dividend
rates, the stocks of most steel COM
panies are reasonably priced. No
conversion problems face these
companies.
Machinery: The cream is off
the machine tool group. Replace
ment demands and export require
ments will take care of only about
80 per cent of present capacity.
zuge amounts of machinery and
equipment will be for sale after
the war The post-War outlook for
the machine tool branch is very
gloomy-but for the manufacturers
Of heavy machinery it is somewhat
better.
Chemicals: The stocks of these
companies are selling around 20
lines earnings and show yields OF
to per cent. They are not
cheap. The industry las high
Investment rating and is good
initiation hedge. The volume OF
products continues to rise. Profit
margins are narrowing, but most
companies should be able to main
tain earnings around present lev
els. Like the steels, these compa-
,ies have no reconversion prob
lens and growth prospects are
better.
Oils: These are outstanding war
and peace leaders. In view of their
continued market strength, f e w
companies are undervalued. Oper-
ating profits have held to high
level and the aggregate net for
the industry may be slightly high
err at the years end than it was
in 1912 Postwar prospects are
very favorable. M ANY improve
ments have been made in the mar
keting and transporting of oil. The
demand for petroleum should in
crease.
Paper: The demand for paper
of all kinds continues to be heavy.
Production facilities in the main
are adequate, but the continued
shortage of pulp throws monkey
wrench into the whole setup. Earn
ings of some paper companies
show an Improvement. Unfoftur-