Gulf & Western’s Earnings Jump 25% in 3rd Quarter

Gulf & Western said Wednesday that its third-quarter profit jumped 25% to $102.6 million, reflecting strong gains in its publishing operations and from Paramount Pictures’ summer hits.

Paramount’s two blockbusters, “Beverly Hills Cop II” and the gangster film “The Untouchables,” have so far grossed more than $220 million between them, contributing to a 10% rise in Gulf & Western’s quarterly revenue to $1.15 billion.

The publishing division, led by Simon & Schuster Inc., posted the steepest increase in operating income of all the divisions for the three months ended July 31. The gain reflected increased textbook sales ahead of the school year.

For the first nine months of the fiscal year, Gulf & Western, which also runs a lesser-known but profitable financial services concern, saw earnings surge 38% to $224.6 million on sales of $3.23 billion.

The investment bank Smith Barney, Harris Upham recommended the stock to investors Wednesday, urging them to take advantage of the low price.

Gulf & Western’s stock closed up $1.25 a share at $84.75 on the New York Stock Exchange. The price had slipped about $10 in the past month from record levels amid rumors that Gulf & Western may acquire McGraw-Hill Inc. or another expensive information services company.

Such a deal is likely in the next year, said Smith Barney analyst Mara Balsbaugh, but it would probably be a friendly merger achieved through an exchange of stock, which would not drain cash from the company.

Gulf & Western, once a collection of attractively priced assets, has been radically transformed since 1983, when the current chairman, Martin S. Davis, took over.

He sold $2.6 billion of assets, while snapping up compatible firms to enhance existing divisions. In late 1984, Gulf & Western bought Prentice-Hall Inc. and added it to Simon & Schuster. The publishing division today sells more books than any other U.S. publisher.

The restructured conglomerate is now a highly integrated marketing concern with divisions that transform each other’s products into sources of new revenue. The publishing division, for instance, creates “novelizations” of films.

Investors, however, are concerned about possible trouble in the future. Critics of Paramount, the box office champion last year, say the unit is better at marketing sequels than producing fresh winners.