ANALYSTS SPLIT ON DIRECTION CORPORATE EARNINGS WILL GO.

Byline: Jonathan Fuerbringer The New York Times

The great boom in corporate earnings, which helped propel the market and buoyed the economy for more than four years, is over. What analysts are arguing over now is how much slower earnings will grow.

While not all companies have reported this quarter, enough have released results to indicate that the third quarter should have the weakest gains in operating earnings in about 4-1/2 years, according to several Wall Street estimates. That would mean that for the year, earnings growth is likely to be the smallest since profits actually fell in 1991.

Weaker earnings are certainly not good news for the stock market in general. But slower growth does not necessarily mean that stocks are going to perform poorly. That's because simply exceeding what investors had expected, as apparently happened this quarter, can support stocks even if the pace of growth slackens. This year's stock market gains make that abundantly clear: The Dow Jones industrial average has risen 17.8 percent and the broader Standard & Poor's 500-stock index is up 14.5 percent.

But with the broader market indexes near record levels and the value of stocks already relatively high, weak earnings growth next year could worry investors and undermine the stock market's performance. And with earnings forecasts for 1997 all over the lot - from flat to up 10 percent - the debate continues on whether the stock market can continue to move higher for yet another year.

The reasons for the earnings slowdown from the 15 to 18 percent average rate from 1992 through 1995 run the gamut. They range from an inability to raise prices and the slowing productivity of workers to the moderating pace of growth in the economy and the fact that a lot of the corporate cost-cutting and downsizing that helped earnings in recent years has now been done.

In the third quarter, the decline in earnings for technology stocks from Apple to Motorola, and a drop at basic industries, including International Paper, Phelps Dodge and Temple-Inland, all served as anchors that put a drag on earnings growth.

The positive push came from energy companies, including Exxon, Chevron and Texaco, which were helped by the spurt in oil prices, and from consumer companies, like the auto makers, that prosper when the economy is growing. Banks, investment firms and insurance companies also contributed to the growth but gave much less of a boost than in recent quarters.

Microsoft and Intel, whose earnings jumped 23.6 percent and 40.9 percent, respectively, went against the grain in the technology sector, while Mobil, which did not make much money in refining, bucked the energy tide.

There are also indications that average companies are no longer the big profit generators they had been, leaving it up to the largest, better known concerns to keep the growth going.

Thomas McManus, an investment strategist at Morgan Stanley & Co., noted that overall there was a rise in the total earnings per share of the companies in the S&P 500 when their results are weighted in favor of the bigger companies. But looking at the simple average of all the companies, earnings per share are down a bit.

``What we are seeing,'' he argued, ``is the transition of the market to an environment where it is tougher and tougher for the average company to increase its earnings. I think a bull market is a market which enables the average company to gain in price.''

Richard Hoey, chief economist and the manager of portfolios worth $2.3 billion at the Dreyfus Corp., said the shift to ``a narrower pattern of earnings gains'' had already made him move toward ``higher quality stocks'' that have ``strong revenue growth.''

Wall Street analysts agree that the huge gains in earnings that helped propel the longest bull market in history are over for this economic cycle. ``We had been expecting this notable inflection point in earnings,'' said Abby Joseph Cohen, market strategist at Goldman Sachs & Co. But that is all that they agree on.

The exact growth figures for the quarter are still being debated on Wall Street, in part because many retailers work on a third quarter ending with October, and have yet to report. In addition, the measures of the same earnings season can vary because analysts differ in how they treat the special write-offs that companies take for everything from accounting changes to employee layoffs. That's why they come up with such different readings for what they call operating earnings.

Because of these differences, the estimates for growth in the third quarter compared with the third quarter of 1995 range from 8 percent at Goldman Sachs to a barely perceptible 0.1 percent at Paine Webber. For the year, the estimates run from 3 percent at Paine Webber to just under 10 percent at Goldman.

So the answer to whether or not this was a good quarter and what is in store for 1997 depends on whom you're asking.

``If you see that the profit decline is in large part due to technology profits being down, that is a concern because people see technology leading the market,'' said Melissa Brown, director of quantitative research at Prudential Securities.

Bruce Steinberg, the manager of macroeconomic analysis at Merrill Lynch, said that the third quarter was showing the ``weakest earnings performance in four years.''

Don't tell that to Cohen at Goldman, though. Third-quarter earnings are ``good, not great,'' she countered. More importantly, she added, ``the quality of earnings is good because there is no inflation behind them.''

Eric Miller, the chief investment officer at Donaldson, Lufkin & Jenrette, said that one reason why slowing growth had not pulled the market lower was that third-quarter earnings ``came in a little better than expected.''

And Thomas Doerflinger, an investment strategist at Paine Webber, is forecasting a rebound in earnings next year despite his belief that earnings last quarter were flat. ``Earnings are reaccelerating again,'' he said.

Doerflinger forecasts a rise of 8.6 percent in earnings next year; Cohen sees about 10 percent growth and says confidently that the year to year gain in earnings ``is not going to end soon.''

But Steinberg is forecasting only 2.5 percent while Miller is expecting earnings to be unchanged.