Standard Poor

The financial scandals of WorldCom, Enron, and others challenged investors confidence in corporate America. In an effort to restore some semblance of confidence in corporate earnings statements, two Wall Street powers attempted to evaluate the quality and character of earnings. On May 14, 2002, Standard Poors (S P) released its Core Earnings Test, a method that would separate a company s earnings into core and non-core classifications. 

As to the hnancial risk taken o n by investo rs in publicly traded pharmaceutical companies, these are no larger than the risk one assumes in investing in a broad stock-market index, such as the Standard Poor s 500 index, which reflects the risk and returns for some 500 publicly traded companies (Myers 1999), a point revisited below in the section on the economics of the industry. 

An easy way to invest in stock mutual funds is to buy an indexed fund. These funds invest in all the stocks of the group they are attempting to duplicate, such as the Standard Poor s 500. As a result, administration fees are minimal. 

Figure 6 History of the Standard Poor stock index in the chemical sector and other selected sectors of the economy, 1997-2002. (From www. bloomberg.com.)...

The chemical industry as a whole has weathered stock market storms pretty successfully over the last 25 years. The Standard Poor s 500 of 1980 contained 14 chemical companies. The same index in 2005 also boasted 14 chemical players -merged, upsized, downsized, but still there, with a good third of the old names still around. 

The broad equity market, as measured by the Standard Poor s 500 Index (S P 500), experienced a historical high in March of 2000. By February of 2003, it had declined approximately 45 percent. However,... 

The only company to stay on BusinessWeek magazine s annual ranking of the top 50 performers in the Standard Poor s 500 index (based on sales growth, earnings growth, total return, and other bottom-line considerations) every year for the first six years running since the list began in 1997. 

Bad as that was, it was nothing compared to the morale the week after July 4, 2002, after The Wall Street Journal reported that Merck had booked 12.4 billion in revenue from its Medco subsidiary over the prior three years that it hadn t actually received. Coming on top of months of corporate scandals, the news sent Merck stock—as well as the Dow Jones Industrial Average, the Standard Poor s 500 stock index, and even the Nikkei Stock Average in Japan—plunging. Merck shares toyed with a five-year low, and the initial public offering of Medco was postponed, then withdrawn. 

The f -value of a structure determined by analysis assumes that the materials used and the quality of workinansliip meet the standards. Poor workmanship and substandard materials used during construction may result in / -values that deviate from predicted values. Therefore, some engineers use a safety factor in their designs based on experience in critical applications. 

Elemental Analysis The carbon, hydrogen, and nitrogen contents of reference standards may be determined by combustion analysis. Combustion analysis thus provides an orthogonal determination of the molecular formula and the purity of the reference standard. Poor agreement between the theoretical and experimental elemental compositions is generally an indication of an impure substance or a discrepancy between the theoretical and actual molecular formulas. Elemental analysis may also identify the presence of solvates and inorganic contaminants. Elemental analysis is typically performed in specialized laboratories under blinded conditions. 

The most well-known and widely accepted rating agencies are Standard Poor s Ratings Group ("S P") and Moody s Investors Service, Inc. ("Moody s"). Duff cmd Phelps and Fitch Investors Service, Inc., are also nationally prominent. 

Summaries of Tarifif Information, Dept, of Commerce Standard Poor s Basic Industry Survey, Chemical ... 

Standard Poor s, Stock Reports. Standard Poor s Corporation, Division of McGraw-Hill Companies, New York. (LCN HG 4905. S443)... 

Appendix F offers a quick reference table to assist the reader in locating desired information in Standard Poor s, Moody s, and other sources. 

An annual report provides the minimum information needed. Financial data are also available from Moody s, Valueline, or Standard Poor s. Current periodicals often provide interesting insights into company operations (particularly Forbes). The organization s website will provide an excellent source of company information. 

Use a basic reference (Moody or Standard Poor, Section 1.1.2) to find the products made by each company. Find the SIC codes for each major product... 

The companies chosen for background material in Section 7.2 of this chapter include four chemical companies, two oil companies, four medium-sized companies in the agricultural-biotech, food, paper, and pharmaceutical sectors, as well as a major diversified company. They were selected based on their major business lines as examples of the CPI. The data presented were obtained from Standard Poor s Stock Reports, Moody s Investor Service, company annual reports, and company lOK reports. This material, which is referred to in future chapters, should provide the reader with a basis for understanding some of the similarities and differences of the CPI companies. The short summaries pre-... 

Source Standard Poor s Stock Reports for respective years. 

From Standard Poor s Stock Reports for respective years. From Chemical Week, May 20,1998, pp 43-50. 

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