Record Mergers and Profit Growth Slowdown Affect 1997 Fortune500 List

April 6, 1998

GM, Ford, Exxon, Wal-Mart & GE Top List
Also on this page:
  • Fun Facts from Fortune 500 Firms
  • The Top 25 of the Fortune 500

A record number of blockbuster mergers in 1997 contributed significantly to the reordering of the biggest companies in America on this year's FORTUNE 500 list. The 1997 FORTUNE 500 list, corporate America's definitive scorecard of U.S. business, illustrates the impact that takeovers have on the bottom line.

As a result of its buyout of Salomon Brothers, Travelers Group jumped from No. 40 on the 1996 list to No. 17 in 1997. After merging with Dean Witter, Morgan Stanley saw its revenues soaring 201% and the company moved from No. 162 to No. 35. Similarly, SBC Communications' buyout of Pacific Telesis changed its ranking from No. 85 to No. 40.

This year's list reveals a slowdown in profit growth and rising stock prices among the country's largest corporations. Most FORTUNE 500 leaders say they're not dismayed by the slowdown in profit growth, but are pleasantly surprised by the strong economy. Total income for the FORTUNE 500 rose 7.8% in 1997, compared to 23.3% in 1996. The median return of companies on the list was more than 30%, well ahead of the 21% return registered in 1996. Analysts attribute rising labor costs, weakness in Asia during the second half of the year, a strong dollar and little room for price hikes as the reasons that profit margins didn't expand beyond their already rich levels.

General Motors captured the number one slot on the FORTUNE 500 list for the 10th year in a row. Leading the pack with revenues of over $178 billion, Detroit-based GM is one of the big three auto makers to rank in the FORTUNE 500's top ten list. Ford Motor is second and Chrysler comes in seventh on the list. Both GM and Ford experienced record years in 1997 with Ford slightly outpacing GM in profits.

Rounding out the FORTUNE 500 top ten are: Exxon (#3), Wal-Mart Stores (#4), General Electric (#5), International Business Machines (#6), Mobil (#8), Philip Morris (#9) and AT&T (#10).

Notable newcomers to the 1997 list include Lucent Technologies (#37), Electronic Data Systems (#88), Republic Industries (#151), NCR (#247) and Cendant (#295). Thirty five companies were displaced this year, primarily due to their being acquired by another company.

In addition to ranking companies by size, FORTUNE editors also took into account 11 different measures by which to evaluate the top corporations' performance. These categories include: Biggest Increases in Revenues, Highest Profits, Biggest Increases in Profits, Highest Returns on Revenues, Assets, and Stockholders' Equity and Highest Market Value. Republic Industries garnered the top spot in the biggest increases in revenues category with its 95 acquisitions in 1997, causing its revenues to jump from $2.4 billion to $10.3 billion. In the highest profits category, Exxon came out on top, earning $8.5 billion, up 12.6% over 1996. Coca-Cola and Schering-Plough scored near top on three key measures, return on revenues, assets and equity, with each earning a return on equity above 50%.

The greatest geographic concentration of companies on the FORTUNE 500 list is in New York with 61 companies, 46 of which are located in New York City. California follows with 52 companies, Illinois with 41 firms and Texas with 36. Ohio is among the up-and-coming locales, becoming the fifth most popular state for FORTUNE 500 headquarters with 30. After New York City, the cities with the most FORTUNE 500 firms are Chicago and Houston with 15 each and Atlanta and St. Louis with 11 companies apiece.

The 1997 FORTUNE 500 issue is the biggest issue in FORTUNE's history at 514 pages and is available on newsstands beginning April 13. Related stories and the FORTUNE 500 list can be accessed at http://fortune.com. beginning Monday, April 6.


FUN FACTS FROM FORTUNE 500 FIRMS

  • If all the Coca-Cola (No. 68) ever produced were put into eight-ounce bottles, the stack would stretch to the moon and back again 1,057 times. Coke's stock returned 28% in 1997, atop a 43% gain in 1996, and 46% in 1995.
  • Wal-Mart (No. 4) employs a not-so-small army of some 825,000 employees, more than the U.S. Army, which has downsized to 488,000 active-duty troops.
  • Eleven years ago, when Andrew Grove became CEO of Intel, it ranked No. 256 on the FORTUNE 500 and was in the red. Now it ranks No. 38, and its profits are $6.9 billion. Grove will step down in May.
  • Prozac accounts for 30% of Eli Lilly's (No. 185) $8.5 billion in revenues. The company's U.S. patent on the drug expires in December 2003.
  • Sara Lee (No. 61) gets only 25% of its operating income from foods like its famous pound cake, while it gets 52% from household and clothing products, like its Wonderbra. Sara Lee's 1997 return to investors: 54%.
  • Every minute, Americans charge another $195,586 on their Citibank credit cards. A 25% decline in credit card income helped drag earnings at Citicorp (No. 21) down 5.2% in 1997.



THE TOP 25 OF THE FORTUNE 500

REVENUES
Rank 1997 Rank 1996 $ millions % CHANGE FROM 1996
1 1 General Motors Detroit 178,174.0 5.8
2 2 Ford Motor Dearborn, Mich. 153,627.0 4.5
3 3 Exxon Irving, Texas 122,379.0 2.5
4 4 Wal-Mart Stores Bentonville, Ark. 119,299.0 12.4
5 5 General Electric Fairfield, Conn. 90,840.0 14.7
6 6 Intl. Business Machines Armonk, N.Y. 78,508.0 3.4
7 9 Chrysler Auburn Hills, Mich. 61,147.0 (0.4)
8 8 Mobil Fairfax, Va. 59,978.0 (17.0)
9 10 Philip Morris New York 56,114.0 2.9
10 7 AT&T New York 53,261.0 (28.5)
11 36 Boeing Seattle 45,800.0 101.9
12 11 Texaco White Plains, N.Y. 45,187.0 1.4
13 12 State Farm Insurance Cos. Bloomington, Ill. 43,957.0 2.7
14 16 Hewlett-Packard Palo Alto 42,895.0 11.6
15 14 E.I. Du Pont De Nemours Wilmington, Del. 41,304.0 4.1
16 17 Sears Roebuck Hoffman Estates, Ill. 41,296.0 8.0
17 40 Travelers Group New York 37,609.0 76.2
18 13 Prudential Ins. Co. of America Newark, N.J. 37,073.0 -
19 15 Chevron San Francisco 36,376.0 (6.0)
20 18 Procter & Gamble Cincinnati 35,764.0 1.4
21 20 Citicorp New York 34,697.0 6.4
22 19 Amoco Chicago 32,836.0 0.3
23 22 Kmart Troy, Mich. 32,183.0 2.4
24 30 Merrill Lynch New York 31,731.0 26.9
25 33 J. C. Penney Plano, Texas 30,546.0 29.2

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