Georgia companies hummed along at a profitable pace in the first half of 2016, indicating that broad swaths of the economy are still growing despite signs of struggle in some industries in other parts of the country.
The 15 largest Georgia firms, measured by revenue, reported total profits of almost $17.5 billion in the first half of 2016, 7 percent higher than a year ago, according to an Atlanta Journal-Constitution analysis.
A broader group of the 51 largest firms in the state did a bit better, with first-half profits of $19.2 billion, up 8 percent compared to last year, according to the AJC’s study.
Revenue increased by 5 percent for both groups.
Despite strong profits overall, the choppy economy was still in evidence: 40 percent of the state’s companies reported lower income in the first half of the year, and a third had lower revenue, the analysis showed.
The AJC's analysis was based on data from companies' filings to the federal Securities and Exchange Commission that were compiled by financial data firm Calcbench. A complete list of the 51 companies and their financial performance is available on www.ajc.com.
Investment experts said many Georgia companies benefited from a bracing combination of rising consumer spending, cheap oil, low interest rates and a weaker dollar that helped boost revenues or lower costs.
“The consumer is in a virtuous cycle,” said Karyn Cavanaugh, senior market strategist at Voya Financial. “The labor market is very strong, gas prices are low and housing, usually the consumer’s biggest asset, has been steadily improving.”
Atlanta-based Home Depot is closing in on $100 billion in annual sales this year despite slowing new store openings to almost zero. A revived housing market in many parts of the country is drawing remodelers and do-it-yourselfers to spend more on paint, pressure washers and other home materials and equipment.
The home improvement retailer’s profits in the first half of 2016 were $4.2 billion, 11 percent higher than a year ago.
Likewise, Delta Air Lines’ profit got a lift from cheaper jet fuel that helped offset lower revenue from overseas and domestic markets. Last month, the Atlanta carrier said it was cutting flying to the United Kingdom after the Brexit vote to leave the European Union slammed the British pound and stirred recession worries in that nation.
Delta posted a $2.5 billion profit so far this year, a 12 percent increase, even though revenue declined 2 percent.
“A lot of Georgia companies are benefiting from the drop in the oil sector,” said Joe Sroka, chief investment officer at NovaPoint Capital in Atlanta.
But one company’s nectar is another’s poison, and that has especially been evident as the nation’s economy has continued its slow, shallow recovery since 2009.
Banks are struggling to make a buck due to low interest rates that crimp their profit margins on loans. Weak demand from China and Europe is hurting exporters. Oil producers, drillers and refineries have been losing billions due to a glut of cheap oil. Crude oil prices have nearly doubled over the last six months, but remain well below the $100-a-barrel level they hit a few years ago.
“Companies tend to be on different economic cycles,” said Sroka. He said oil, banks and other cyclical industries may have bottomed out and may do better later this year.
Second-quarter profits fell 3.5 percent at the nation’s largest companies included in the S&P 500 index, mostly because of an 84 percent decline in income at oil producers, refiners and related companies.
Georgia has few oil-related companies, so its corporate profits were strong in comparison. One exception: Atlanta-based oil services firm RPC Inc.’s loss tripled to $81 million in the first half of 2016 from a year ago.
Among those with lower profits, Duluth-based farm equipment maker AGCO posted a 56 percent decline in the first half of the year as low crop prices cut into farmers’ appetites for new tractors and other equipment.
Likewise, Asbury Automotive Group’s year-to-date profit fell 12 percent. The Duluth-based chain of auto dealerships felt a profit squeeze due to rising expenses, slowing auto sales, and thinning margins on new vehicle sales, especially for luxury and import models.
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