New wave: will rising interest rates mean declining fortunes for the state's largest publicly traded companies?

• Author: Maley, Frank
• Position: Top 75

In the stock markets, a rising tide doesn't lift all ships--just the ones without holes in their hulls. With money about as cheap as it could be and the gross domestic product on the rise, the median market value of the state's 75 largest public companies rose 18% during the 12-month period that ended June 30. But the market capitalization required to make BUSINESS NORTH CAROLINA'S Top 75--compiled this year by Raleigh-based First Citizens Bank Capital Management Group--declined 8% to $57 million.

Few companies rode the currents better than Charlotte-based MedCath, which operates heart hospitals. MedCath more than tripled its market cap and jumped 21 places to No. 44. It lost $3.35 per share in its latest fiscal year but earned 14 cents a share in the first six months of fiscal 2004.

Meanwhile, the prospects of Durham-based Trimeris, which has experienced disappointing sales of its first product, an anti-AIDS drug, sank like a stone. Trimeris stock fell 68% during the past year, and the company dropped 20 places to 47th.

Charlotte-based Bank of America again led the Top 75 with a market cap of $171 billion--up nearly 45% from last year. No. 2 Wachovia, a Charlotte-based BofA rival, boosted its market cap 8% to $58 billion, and Mooresville-based hardware chain Lowe's, the state's third-largest public company, gained 25% to finish at $42 billion.

But the days of easy money appear to be coming to a close. On June 30, the Federal Reserve nudged up its target for the federal-funds rate a quarter of a percentage point to 1.25%, after chipping away at it for four years.

Businesses with strong ties to the rate-sensitive housing market--including construction companies and banks--likely will feel the impact most, says John Silvia, chief economist for Wachovia. He expects a steady increase in short-term interest rates over the next year or two. Companies thinking about financing an expansion might want to borrow sooner rather than later to lock in lower rates or switch from floating-rate to fixed-rate debt, he says. Or they could wait. "And then all of the sudden, a year out they're scrambling for credit, and the interest-rate costs are eating them alive."

COMING AND GOING Five companies made the Top 75 for the first time or returned after missing the cut last year. 2004 2003 Newcomers rank Dropouts rank R.H. Donnelley (1) 23 Quintiles Transnational 17 (2) Charles & Colvard 71 Lending Tree (3) 36 Cooperative Bancshares 73 Blue Rhino (3) 51 Peoples Bancorp of North 74 MountainBank Financial (3) 64 Carolina ECB Bancorp 75 United Community Bancorp 71 (1) Moved to Cary from Purchase, N.Y., in March 2004 (2) Went private (3) Acquired by another company PUBLIC COMPANIES MARKET VALUE 6/30/04 '04 RANKED BY 6/30/04 Industry value '03 MARKET VALUE (millions) 1 Bank of America Banking $171,218.2 1 (N-BAC) Charlotte 2 Wachovia Banking 57,901.6 2 (N-WB) Charlotte 3 Lowe's Hardware stores 41,714.8 3 (N-LOW) Mooresville 4 BB&T Banking 20,547.1 5 (N-BBT) Winston-Salem 5 Duke Energy Energy 18,398.3 4 (N-DUK) Charlotte 6 Progress Energy Energy 10,745.9 6 (N-PGN) Raleigh 7 Jefferson-Pilot Insurance 7,019.2 8 (N-JP) Greensboro 8 Nucor Steel 5,898.6 11 (N-NUE) Charlotte 9 R.J. Reynolds Tobacco (1) Tobacco 5,712.3 13 (N-RJR) Winston-Salem 10 Laboratory Corp, of America Lab testing 5,619.3 9 (N-LH) Burlington 11 VF Clothing 5,346.3 10 (N-VFC) Greensboro 12 Family Dollar Stores Discount stores 5,179.8 7 (N-FDO) Matthews 13 Red Hat Software 4,163.4 22 (Q-RHAT) Raleigh 14 Goodrich Aerospace and 3,761.0 14 (N-GR) Charlotte defense equipment 15 SPX Industrial products 3,438.8 12 (N-SPW) Charlotte 16 Martin Marietta Materials Rock quarries 2,137.6 18 (N-MLM) Raleigh 17 SpectraSite (2) Cell-phone towers 2,119.5 24 (N-SSI) Cary 18 Carlisle Construction and 1,918.4 20 (N-CSL) Charlotte industrial products 19 PPD Drug research 1,774.2 19 (Q-PPDI) Wilmington 20 Cree Silicon carbide, 1,623.7 16 (Q-CREE) Durham semiconductors 21 Piedmont Natural Gas Gas utility 1,623.4 21 (N-PNY) Charlotte 22 Speedway Motorsports Racetracks 1,477.5 26 (N-TRK) Concord 23 R.H. Donnelley Publishing 1,352.3 - (N-RHD) Cary 24 Inveresk Research Group (3) Drug research 1,338.1 32 (Q-IRGI) Cary 25 RF Micro Devices Semiconductors 1,337.1 28 (Q-RFMD) Greensboro MARKET VALUE PRICE AND EARNINGS Change Shares 6/30/04 Change '04 RANKED BY 6/30/04 from outstanding stock from '03 MARKET VALUE 6/30/03 (millions) price 6/30/03 1 Bank of America 44.6% 2,038.8 $84.62 7.1% 1 (N-BAC) Charlotte 2 Wachovia 7.7 1,314.8 44.50 11.4 2 (N-WB) Charlotte 3 Lowe's 24.6 786.2 52.55 22.4 3 (N-LOW) Mooresville 4 BB&T 27.1 561.1 36.97 7.8 5 (N-BBT) Winston-Salem 5 Duke Energy 2.3 914.9 20.29 1.7 4 (N-DUK) Charlotte 6 Progress Energy 1.7 246.6 44.05 0.3 6 (N-PGN) Raleigh 7 Jefferson-Pilot 19.1 139.8 50.80 22.5 8 (N-JP) Greensboro 8 Nucor 54.4 78.9 76.76 57.1 11 (N-NUE) Charlotte 9 R.J. Reynolds Tobacco (1) 82.1 85.3 67.59 81.6 13 (N-RJR) Winston-Salem 10 Laboratory Corp, of America 25.9 141.4 39.70 31.7 9 (N-LH) Burlington 11 VF 45.7 109.9 48.70 43.4 10 (N-VFC) Greensboro 12 Family Dollar Stores (21.1) 171.5 30.42 (20.3) 7 (N-FDO) Matthews 13 Red Hat 222.1 183.1 22.97 204.6 22 (Q-RHAT) Raleigh 14 Goodrich 52.4 117.6 32.33 54.0 14 (N-GR) Charlotte 15 SPX 0.0 76.0 46.44 5.4 12 (N-SPW) Charlotte 16 Martin Marietta Materials 30.1 48.2 44.33 31.9 18 (N-MLM) Raleigh 17 SpectraSite (2) 81.9 48.3 43.22 73.4 24 (N-SSI) Cary 18 Carlisle 48.5 31.1 62.25 47.7 20 (N-CSL) Charlotte 19 PPD 10.9 56.2 31.77 10.7 19 (Q-PPDI) Wilmington 20 Cree 36.3 74.2 23.15 42.5 16 (Q-CREE) Durham 21 Piedmont Natural Gas 25.6 38.2 42.70 10.0 21 (N-PNY) Charlotte 22 Speedway Motorsports 30.1 43.1 33.44 24.8 26 (N-TRK) Concord 23 R.H. Donnelley 21.4 31.2 43.74 19.9 - (N-RHD) Cary 24 Inveresk Research Group (3) 105.9 38.0 30.84 72.3 32 (Q-IRGI) Cary 25 RF Micro Devices 23.8 186.5 7.50 27.1 28 (Q-RFMD) Greensboro PRICE AND EARNINGS Latest One-year '04 RANKED BY 6/30/04 fiscal 6/30/04 total '03 MARKET VALUE year EPS [dagger] P/E ratio return 1 Bank of America $7.13 11.1 8.4% 1 (N-BAC) Charlotte 2 Wachovia 3.36 12.4 10.7 2 (N-WB) Charlotte 3 Lowe's 2.32 20.9 24.9 3 (N-LOW) Mooresville 4 BB&T 2.78 13.6 8.0 5 (N-BBT) Winston-Salem 5 Duke Energy 1.28 16.9 8.9 4 (N-DUK) Charlotte 6 Progress Energy 3.56 12.8 4.8 6 (N-PGN) Raleigh 7 Jefferson-Pilot 3.66 13.6 21.2 8 (N-JP) Greensboro 8 Nucor 0.69 39.1 52.6 11 (N-NUE) Charlotte 9 R.J. Reynolds Tobacco (1) 4.25 13.4 90.3 13 (N-RJR) Winston-Salem 10 Laboratory Corp, of America 2.23 17.1 30.1 9 (N-LH) Burlington 11 VF 3.58 13.2 45.8 10 (N-VFC) Greensboro 12 Family Dollar Stores 1.43 19.5 (19.6) 7 (N-FDO) Matthews 13 Red Hat 0.08 189.5 191.9 22 (Q-RHAT) Raleigh 14 Goodrich 0.94 34.0 57.0 14 (N-GR) Charlotte 15 SPX 3.44 13.2 7.2 12 (N-SPW) Charlotte 16 Martin Marietta Materials 2.05 20.2 30.0 18 (N-MLM) Raleigh 17 SpectraSite (2) (0.42) nm 68.8 24 (N-SSI) Cary 18 Carlisle 2.89 20.0 44.2 20 (N-CSL) Charlotte 19 PPD 0.89 33.2 7.6 19 (Q-PPDI) Wilmington 20 Cree 0.46 34.2 30.1 16 (Q-CREE) Durham 21 Piedmont Natural Gas 2.22 15.8 12.2 21 (N-PNY) Charlotte 22 Speedway Motorsports 1.59 20.0 28.6 26 (N-TRK) Concord 23 R.H. Donnelley 2.57 17.0 13.1 - (N-RHD) Cary 24 Inveresk Research Group (3) 1.07 30.9 102.1 32 (Q-IRGI) Cary 25 RF Micro Devices 0.20 35.8 17.7 28 (Q-RFMD) Greensboro REVENUE * NET INCOME Latest Change Latest '04 RANKED BY 6/30/04 fiscal year from year fiscal year '03 MARKET VALUE (millions) before (millions) 1 Bank of America $38,855.0 10.6% $10,810.0 1 (N-BAC) Charlotte 2 Wachovia 20,002.0 12.2 4,247.0 2 (N-WB) Charlotte 3 Lowe's 31,160.0 17.6 1,862.0 3 (N-LOW) Mooresville 4 BB&T 4,971.0 14.5 1,064.9 5 (N-BBT) Winston-Salem 5 Duke Energy 22,210.0 41.8 (1,005.0) 4 (N-DUK) Charlotte 6 Progress Energy 8,743.0 8.1 811.0 6 (N-PGN) Raleigh 7 Jefferson-Pilot 3,650.3 4.6 492.0 8 (N-JP) Greensboro 8 Nucor 6,265.8 30.5 62.8 11 (N-NUE) Charlotte 9 R.J. Reynolds Tobacco (1) 5,267.0 (15.2) (3,446.0) 13 (N-RJR) Winston-Salem 10 Laboratory Corp, of America 2,939.4 17.2 321.0 9 (N-LH) Burlington 11 VF 5,207.5 0.6 397.9 10 (N-VFC) Greensboro 12 Family Dollar Stores 4,750.2 14.1 247.5 7 (N-FDO) Matthews 13 Red Hat 126.1 38.5 14.0 22 (Q-RHAT) Raleigh 14 Goodrich 4,382.9 15.1 38.5 14 (N-GR) Charlotte 15 SPX 5,081.5 0.7 264.6 12 (N-SPW) Charlotte 16 Martin Marietta Materials 1,685.9 (0.4) 101.1 18 (N-MLM) Raleigh 17 SpectraSite (2) 301.0 (2.6) (0.1) 24 (N-SSI) Cary 18 Carlisle 2,108.1 7.0 88.9 20 (N-CSL) Charlotte 19 PPD 727.0 19.4 46.3 19 (Q-PPDI) Wilmington 20 Cree 229.8 48.4 34.9 16 (Q-CREE) Durham 21 Piedmont Natural Gas 1,220.8 46.8 74.4 21 (N-PNY) Charlotte 22 Speedway Motorsports 404.5 7.4 58.5 26 (N-TRK) Concord 23 R.H. Donnelley 256.4 245.9 (50.0) - (N-RHD) Cary 24 Inveresk Research Group (3) 272.5 22.5 38.1 32 (Q-IRGI) Cary 25 RF Micro Devices 651.4 28.1 29.7 28 (Q-RFMD) Greensboro NET INCOME DIVIDENDS Change '04 RANKED BY 6/30/04 from year Net Last 12 6/30/04 '03 MARKET VALUE before margin months Yield 1 Bank of America 16.9% 22.1% $3.30 3.9% 1 (N-BAC) Charlotte 2 Wachovia 18.7 17.4 1.50 3.4 2 (N-WB) Charlotte 3 Lowe's 26.6 6.0 0.13 0.2 3 (N-LOW) Mooresville 4 BB&T (17.7) 17.1 1.31 3.6 5 (N-BBT) Winston-Salem 5 Duke Energy nm nm 1.10...