Some of the nation’s largest corporations could produce healthy earnings gains in the coming weeks, not just from improved operating results but because of heftier contributions by their pension funds to their bottom line.
AT&T Corp. could see its pretax earnings improve by around $800 million, or $200 million a quarter, thanks to its pension fund; E.I. du Pont de Nemours and Co. could gain about $500 million this year, or $125 million a quarter; and Ford Motor Co., $100 million a year, or $25 million a quarter, according to Pensions & Investments’ analysis of the companies’ latest financial reports.
IBM Corp.’s 2000 pretax earnings could grow by around $200 million, or $50 million a quarter, based on an analysis of the company’s disclosures of its pension liabilities and assets in its 1999 financial statements.
AT&T earned 4% of its pretax earnings in 1999 from its pension fund; Du Pont, 9.7%; GE, 8.9%; and IBM, 5.4%. Ford, which incurred a pension expense last year, could receive financial help from its pension fund in 2000.
The earnings gains by many of the nation’s old economy companies are attributable to stellar investment returns on pension assets as well as the rise in long-term interest rates last fall, which caused most pension plan sponsors to bump upward, by as much as 100 to 150 basis points, the rate they use to calculate the present value of their future pension obligations.
