The 200 largest publicly traded companies in Los Angeles grew at an astonishing pace in the past year as a group, profits jumped 55 percent.
The annual ranking of public companies by the Los Angeles Business Journal shows that nearly three-quarters posted gains in their market capitalization from mid-year last year to mid-year this year, reflecting the surge in corporate profits and the strength of the stock market. (The list begins on Page 23.)
The list also provides a snapshot of a diverse economy. No industry dominates. Economists say the data indicates that Los Angeles’ broad-based economy is unlikely to get battered even if the housing market takes a tumble.
“The diversity of companies in Los Angeles provides a bit of a safety net,” said Sean Snaith, director of the Business Forecasting Center at the University of the Pacific in Stockton. “There’s also a perception outside Los Angeles that this is a city mostly of entertainment companies and that’s really not the case.”
Large companies in real estate, energy, construction and utilities showed the strongest gains.
For the past decade, biotech giant Amgen Inc. has captured the top spot as the largest local company based on market capitalization, though it grew by less than 1 percent in the past year. Second-place Walt Disney Co., which was half the size of Amgen in 2004, is gaining fast. Disney’s market cap jumped 23 percent to $65 billion in the past year, propelled by the new leadership of Robert Iger and the future growth prospects of Steve Jobs’ Pixar Animation Studios, which Disney acquired last year.
Thanks primarily to rising oil prices, investors pushed Occidental Petroleum Corp.’s market cap up 36 percent to $43 billion as the company’s profits doubled. Occidental’s exposure in Russia has made it a Wall Street darling for several years. Last year, Los Angeles lost Unocal Corp. as one of its last remaining oil companies.
One big mover was CB Richard Ellis Group Inc., which landed at No. 14 this year, up from No. 25 last year, with market cap jumping 75 percent to $5 billion. Brett White, president and chief executive, said: “An expanding market cap is confirmation that the capital markets are recognizing that our strategy is working. “We’ve benefited from a vibrant commercial real estate market these past couple of years, but our performance has outpaced the growth of the market.”
The market cap, a standard way of measuring a company’s size, is the total value of a company’s stock. It is figured by multiplying the value of a single share of company stock by the total amount of shares outstanding.
At midyear, the top 200 publicly traded companies in Los Angeles posted a combined market cap of $464 billion, an 11 percent increase from a year ago. Revenue jumped at the same 11 percent pace to a combined total of $262 billion. The increases were made with very little growth in employment and plenty of cash sitting on the sidelines.
High-tech turn
Keitaro Matsuda, senior economist at Union Bank of California, conceded that rankings by market cap and profitability primarily reflect companies that are highly valued by Wall Street. Despite the unprecedented profit growth, however, job creation was virtually stagnant. The rankings provide some insight into which companies will lead their sectors in job growth.
“What kind of jobs do we have and what kind of jobs are being created?” Matsuda asked. “The bottom line for every community is jobs and income. What you really want are jobs that provide high incomes, not necessarily the addresses of corporate headquarters.”
He cautioned that Los Angeles still has a large number of service sector companies, many of them brand names in fashion and tourism. Hilton Hotels Corp. ranked No. 9, Guess Inc. at No. 41 and Warner Music Group, which splits its headquarters between New York and Burbank, at No. 20.
“What’s amazing is that L.A. still has a lot of brands that appeal to young people with the Southern California image of beach and surf,” Matsuda said, referring to newcomer True Religion Apparel Inc., at No. 95, and California Pizza Kitchen Inc., ranked No. 82. “L.A. used to be dominated by defense contractors, and now the economy is increasingly high-tech and the manufacturing base has shrunk.”
Disney, with 133,000 employees, and Northrop Grumman Corp., with 123,600 workers, are the largest employers in the county, though most of their employees are based outside Los Angeles. Perhaps the best indicator of strength is that even some large companies are well down the list; one with more than 4,000 employees is No. 112.
For investors, the rankings give a clear picture of winners and losers.
Herbalife Ltd., the nutritional supplement company, jumped to No. 30 this year, up from No. 40 last year, and now has a market cap of $2.7 billion, an 85 percent increase. Jacobs Engineering Group Inc., a construction firm with 36,600 employees worldwide, had a 45 percent jump in market cap to $4.5 billion.
Mattel Inc. had an 11 percent drop in market cap to $6.5 billion and a 27 percent decline in profits. DreamWorks Animation SKG also lost ground with a 69 percent deceleration in profits and a 7 percent drop in market cap to $2.4 billion.
Bennett Gross, senior vice president and managing director of equities at Financial Management Advisors LLC, said real estate would be closely watched to determine a slowdown in the market. So far, real estate investment trusts, or REITs, appeared to be holding their own even as the stocks of homebuilders staged a retreat.
KB Home, ranked No. 19, saw its market cap shrivel to $4.4 billion for the period ended June 30, a 36 percent decline from $6.9 billion a year ago. Ryland Group Inc., at No. 37, posted a 39 percent drop in market cap to $2 billion.
“The homebuilders are reflecting the fact that real estate probably has topped,” said Gross. “Still, with 4.6 percent unemployment, housing prices may not be going up, but people certainly are not sending their keys back to the bank as they were in the 1990s. We don’t see the kind of devastation in the way the markets fell apart then.”
