On the face of it, third-quarter earnings by Maryland's publicly traded companies don't look bad. Most that have reported financial results did better than in the third quarter of 1990. Even big money-losers like MNC Financial Inc. reduced their quarterly losses.
But scratch the surface and the picture isn't pretty.
Earnings at the Ryland Group Inc. of Columbia rose 20 percent, for example, but most of the gain came from Ryland's mortgage division, not the core homebuilding business. Profits at First Maryland Bancorp rose 27 percent, but tight cost controls and lower provisions for loan losses disguised still-weak loan demand. And Baltimore Gas and Electric Co. said that its profits, up 25.9 percent, were hot only because the summer weather was, too.
Quarterly financial results from Maryland's largest companies offer some clues to the health of the state economy.
"Corporate earnings reports put out by companies are a good concurrent indicator" of how the economy is doing, said Mahlon Straszheim, chair of the economics department at the University of Maryland's College Park campus.
But economists are divided on what the third-quarter results mean.
"It is a sign that the economy has bottomed out or is bottoming out," said David Donabedian, an economist for Mercantile Safe Deposit & Trust Co. in Baltimore. "Locally and nationally, I believe that to be the case."
"I'd say we did disappointingly," said Michael A. Conte, director of the Center for Business and Economic Studies at the University of Baltimore. "None of the hopefuls came through. There are no shiners except Alex. Brown and T. Rowe Price."
Mixed signals dominated, even in the industries that traditionally lead the economy into and out of recessions. Homebuilders such as Ryland are showing signs of life. But retailers such as specialty clothing company Merry-Go-Round Enterprises Inc. of Joppa appear to be stagnating.
Homebuilders may be driving toward the light at the end of the tunnel, but publicly traded commercial real estate companies could be peering through the dark for years.
"I think you'll see a slow recovery," said Nancy L. Smith, vice president and corporate secretary at Ryland. "We see the first-time homebuyer back in the market."
The most encouraging sign: Ryland's orders for new homes were up 13 percent, including 22 percent in the mid-Atlantic region.
The increased orders didn't do much for third-quarter earnings -- it can take several months to arrange a mortgage and build a house, so the surge in orders will show up on the bottom line during the next two quarters.
Commercial real estate companies are having a tougher time as they struggle with financing woes and a market glut.
The Rouse Co. of Columbia and BTR Realty Inc. of Linthicum haven't yet reported third-quarter earnings. But each gets big chunks of revenue from office leasing, which is very weak, and retail sales, which have been sluggish.
For years, Merry-Go-Round's has had a reputation for strong earnings and sales growth that has been the envy of the retailing industry. Now that reputation is, at least for a short time, on the wane.
Merry-Go-Round hasn't reported third-quarter results, but its stock fell last month because of grim projections. The culprit: sluggish sales, especially in September, when sales at stores open more than a year rose only 2 percent.
The recession has hit hard at Towson-based Black & Decker Corp., where third-quarter earnings fell 47 percent.
"We do have a large interest expense [because of the 1989 acquisition of Emhart Corp.], but a lot of what we had in the quarter was heavily influenced by the U.S. recession," Barbara Lucas, a Black & Decker spokeswoman, said. "Things are looking pretty much the same. . . . Our business is kind of bumping along the bottom. We're not getting worse, but there's no clear uptick."
"Bad, but better" read The Sun's headline the day after MNC Financial Inc., parent of Maryland National Bank, reported a third-quarter loss of $59 million. In the third quarter of last year, the company lost $173 million.
That performance was a metaphor for the whole industry's local performance. Profits were up -- or losses were smaller -- at most local banks. But no one was really happy.
Charles W. Cole Jr., president and chief executive of First Maryland Bancorp, said that his company's 27 percent earnings gain was accomplished with little help from the economy.Mr. Cole said that loan growth is still weak, indicating that businessmen aren't demanding new credit to fund business expansion.
The company has benefited from rising fee income, especially service charges on newly opened checking accounts whose owners went to First Maryland because they thought their old bank was shaky.