West Expected to Be Best This Year for Profits : Survey: Areas home to fast-growing corporations stand to benefit from the influx of funds.
Companies in the western United States are expected to see profits grow faster than anywhere else in the nation this year and next, according to a study produced for the Associated Press.
Midwestern corporations should report the least improvement.
While not necessarily an indicator of regional economic performance, because many large companies do business far from their headquarters, areas that are home to corporations with fast-growing profits stand to benefit from the influx of funds.
“To the extent that a firm is profitable, from whatever source, it’s also going to support the local economy,” said Paul Bishop, a senior economist at Wefa Group Inc., an economic consulting firm in Bala Cynwyd, Pa.
Corporate earnings can find their way into local economies through workers’ paychecks, plant expansions, taxes and the like. On the flip side, slowing profit growth can hurt towns, cities and whole regions.
Companies in the western United States are expected to see profits grow 30.8% this year from 1994 levels, according to the study, done by Chamberlin & Pearson Research Associates Inc., a research firm based in Vero Beach, Fla.
Next year, the West should remain No. 1 with 21.7% growth, despite slowing significantly as will profits for the whole nation.
The regional figures are based on the estimates of Wall Street analysts as of the last week in August. They were compiled by I/B/E/S Inc., a New York-based provider of corporate earnings information.
Strength on the part of western corporations did not surprise analysts who follow regional economics. Since the West was the last region to emerge from the recession of 1990-91, profits are apt to grow more quickly.
For example, defense cutbacks in California hurt the earnings of many contractors. As profits begin to recover, they are improving off very low levels. Thus, the year-to-year improvement looks strong.
The opposite is proving true for the nation’s midsection.
“The Midwest didn’t really go through a significant slowdown in the early 1990s, so the Midwest has been doing really pretty well all through this economic expansion,” said Sung Won Sohn, chief economist at Norwest Corp., a Minneapolis-based banking company.
“Starting from a high plateau, comparisons are not as exciting.”
The study found earnings for Midwest companies are expected to grow at 13.3% this year and 15.6% in 1996. The South and Northeast will stay in second and third positions for the next two years.
In 1995, southern corporations are expected to show profit growth of 23.6%, second to the West. Northeastern companies should see earnings expand 20.4%. In 1996, the Northeast is expected to be up 16.4%, with the South expanding at 16.8%.
For the nation as a whole, profits are expected to rise 20.5% this year and 17% in 1996. Individual states should show some wide variations.
Idaho companies are expected to report the greatest profit growth of the 50 states and the District of Columbia this year at a whopping 174.5%.
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State of Wealth
States ranked by annual profit growth, or decline, of companies based there, according to Wall Street analyst estimates:
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‘95 profit ’96 profit State growth estimate Idaho 174.5% 37.5% South Carolina 76.7 21.1 South Dakota 47.1 18.1 Arizona 39.1 12.6 West Virginia 35.9 18.7 California 33.0 21.9 Oklahoma 32.7 17.7 Massachusetts 32.0 30.3 Virginia 29.8 17.7 Texas 29.5 17.0 Georgia 28.9 17.2 Delaware 28.0 15.1 Maryland 23.9 19.0 Illinois 23.5 15.2 Oregon 22.7 13.3 New Hampshire 22.6 24.1 Washington 22.4 18.9 Utah 22.1 21.7 Pennsylvania 22.1 16.8 Wisconsin 21.9 18.3 New York 21.1 15.2 Tennessee 20.7 16.3 Nevada 20.5 25.9 Connecticut 17.4 15.8 Ohio 17.0 12.9 New Jersey 16.6 14.8 Mississippi 16.2 19.4 Vermont 15.0 16.6 Alabama 14.1 21.5 Louisiana 14.1 15.5 Kentucky 13.9 17.2 Iowa 13.8 11.8 Minnesota 13.4 17.2 North Carolina 12.5 12.8 Florida 12.4 17.7 Missouri 12.2 13.5 Arkansas 12.1 17.9 Rhode Island 11.8 13.5 Kansas 11.0 11.8 Nebraska 8.8 16.3 District of Columbia 7.9 11.2 North Dakota 6.0 7.4 Colorado 4.7 25.8 Montana 4.1 14.4 Indiana 4.1 12.6 Maine 3.1 17.7 Alaska 2.9 7.1 Michigan 0.1 19.2 New Mexico -4.8 30.6 Hawaii -4.9 14.8 Wyoming * *
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* Analyst estimates not available
Sources: Chamberlin & Pearson Research Associates, I/B/E/S
