Home >  Business

Tuesday, April 09, 2002

By Joyce Gannon, Post-Gazette Staff Writer

To Joseph Famoso, it's not surprising that the five companies with the largest market capitalization in this Top 50 list also had the highest net income, too.

	Alcoa BUSINESS: Aluminum production HEADQUARTERS: North Side EMPLOYEES: 129,000 Mellon Financial Corp. BUSINESS: Financial services HEADQUARTERS: Downtown EMPLOYEES: 21,300 PNC Financial Services Group BUSINESS: Financial services HEADQUARTERS: Downtown EMPLOYEES: 24,200 H.J. Heinz Co. BUSINESS: Food products HEADQUARTERS: Downtown EMPLOYEES: 45,800 PPG Industries Inc. BUSINESS: Glass, chemicals, coatings HEADQUARTERS: Downtown EMPLOYEES: 34,900 Online Graphic: Market Capitalization

Think about it, said the research analyst for Downtown brokerage Hefren-Tillotson. Firms that make the most money naturally are attractive to investors, so, "Companies that do well and produce high net income will be ones with higher market capitalization."

Of course, it helps if you're a really big company that requires a lot of support from stockholders -- or stockholders' money, to be more precise. That's because market capitalization reflects the number of outstanding shares multiplied by the share price. For this year's Top 50, the figure was calculated using the stock price and shares outstanding at the close of trading Dec. 31, 2001.

Not surprisingly, this year's market cap leader -- Alcoa -- also was the region's biggest company. Its market capitalization stood at $30.1 billion at the end of last year, up from $28 billion in 2000. The global giant aluminum maker saw its stock price gain 6 percent for the year, and it also was the top local company in terms of 2001 revenue at $22.9 billion.

"Alcoa is one of the best managed companies in their space," Famoso said. "While the economy worldwide hasn't cooperated, they have focused internally to cut costs and have been very successful in doing that, and should be well positioned for the recovery if it materializes."

The two largest financial institutions in the region, Mellon Financial Corp. and PNC Financial Services Group, ranked second and third, respectively, although a down year for their stock prices caused their market cap to fall.

Mellon's market capitalization fell to $16.6 billion from $24 billion in 2000, while PNC's dropped to $15.9 billion from $21.2 billion. Shares in Mellon and PNC dropped by 24 percent and 23 percent, respectively, for the year.

"Last year in general was a difficult year for [the financial industry] given the fact we had a difficult stock market and both have a market-sensitive business," Famoso said.

While both Mellon and PNC got a boost from a series of interest-rate reductions by the Federal Reserve last year, "These stocks may face a little head wind [this year], given that most investors expect the Fed to raise short-term interest rates," Famoso said. "That's typically a negative for financials."

No. 4 H.J. Heinz Co.'s market capitalization fell to $14.4 billion from $16.5 billion in 2000. The food and condiment company, which had dramatically lower income last year, saw its stock price drop 13 percent for the year.

"Their big challenge going forward is to diversify beyond the core ketchup business and create some top-line momentum," Famoso said. "That's necessary to drive the stock price higher from this point on."

No. 5 PPG Industries' market cap rose to $8.73 billion from $7.8 billion in 2000, aided by a 12 percent increase in its stock price.

Like Alcoa, PPG has undertaken cost-cutting measures, including work force reductions and plant closings, and is expected to announce further cuts this month.

"When the revenue side turns around, they should produce [better] earnings," Famoso said.