(FORTUNE Magazine) – HOW DO businesses cope with this tepid recovery? Some are cashing in on the markets developing early in the cycle; others are finding new ones at home and abroad. Many are working harder than ever to cut costs and lift productivity. Most have been languishing for so long that even little gains are cause for celebration.

-- AUTOS: Out of the red. The pace will be ''glacial,'' says Dean Witter auto analyst Ronald Glantz, but the industry will slowly chug back to life in the second half. He forecasts unit sales of 13.1 million for cars and light trucks this year, vs. 12.3 million last, and up to 14.8 million next. That should help lift 1992 sales for the Big Three to $233.9 billion. The hottest growth will come from sport utility vehicles like the Jeep Cherokee and Ford Explorer, says Tom Webb, economist at the National Auto Dealers Association. The big news is in profits. Detroit will wring an estimated $3 billion out of its costs in 1992, helping to transform last year's $7.5 billion loss into earnings that Glantz projects at $2.9 billion. Things will get better in 1993 as Ford, GM, and Chrysler chalk up $269.9 billion in group sales, reaping $8.3 billion in profits. Imports will account for 17.2% of the U.S. auto market in 1993, down from a 1987 peak of 26.7%. But autos made in the U.S. by foreign producers now account for about 14% of domestic sales, and some of the shrinkage in imports is due to those so-called voluntary trade restraints by the Japanese -- which will also benefit South Korean carmakers. Glantz adds that Europeans will ship somewhat more luxury cars to compete with the Japanese for U.S. market share. Why will the car recovery be so sluggish? Though the average age of cars on the road is eight years -- the highest since 1950 -- incomes are growing slowly and cars are more expensive, so people are hanging on to their old ones longer. John Hammond, senior partner at the J.D. Power & Associates research firm, also points to social changes: ''Vehicle newness doesn't count for status the way it used to.''

-- FOOD AND AGRIBUSINESS: Cooking. The food industry has its own recipe for recovery. Start with high-margin value-added products. Says John McMillin, a Prudential Securities analyst (and baseball fan): ''The trend of selling less flour and more cake is still in the fourth or fifth inning. And the low-fat and convenience games are still in the first inning.'' McMillin predicts / overall growth of 11% for 1992, edging up to nearly 13% in 1993. And this is a so-called mature industry? Add a pinch of pricing -- but only for the market leaders, who are less threatened than the second-tier players by the success of private-label products. Merrill Lynch analyst William Maguire cites cereal giant Kellogg's recent 1% price increase -- its first in seven months -- as a good sign: ''Price flexibility in the industry will be easier to come by in 1993.'' On the downside, he says, the law of averages dictates that the unusually good weather of the 1980s is unlikely to hold in the decade to come, meaning higher raw material prices. Finally, fold in strong growth abroad for farmers. Prudential's McMillin sees an especially bright future for U.S. agribusiness concerns, which remain the world's low-cost producers. Companies like Archer-Daniels-Midland, the world's largest maker of soybean meal, and Pioneer Hi-Bred, the largest seed supplier, will lead as demand rises, ''moving America back to being the breadbasket of the world.'' He adds, ''In an emerging Soviet republic they may not be able to buy a Mercedes, but they can buy ground coffee.'' And as other parts of the world start gobbling up, say, Perdue chickens, U.S. farmers will be doubly rewarded: It takes three pounds of corn and two of soy meal to produce one pound of bird.

-- CONSUMER ELECTRONICS: Looking for the next wave. The industry has finally stopped holding its breath for high-definition TV, which is stalled in a tangle of competing standards. Instead it's poised for the debut of ''personal digital assistants,'' so called by Apple CEO John Sculley who is working with Sharp of Japan to bring out the first round in 1993. Sculley calls electronic organizers now on the market ''reptilians that came out of the ocean and onto the land'' compared with the paperback-size gadgets that will recognize handwriting and network with other computers. Says Eugene Glazer, analyst at Dean Witter: ''It's going to be a huge market by 1994, a multibillion-dollar business by 1995.'' This year sales for the industry as a whole will rise at least 3.5% to $37 billion, according to the Electronic Industries Association (EIA). Increasingly popular home offices are helping to drive the growth. Thomas Miller of the Link Resources technology research firm estimates that 35 million households will have set them up by the end of this year. The EIA expects that revenues from home information equipment -- fax machines, < cordless phones, word processors, and other gizmos frequently used for offices -- will increase to $9.1 billion in 1992, up 3.6%. Audio revenues, which get a boost from a couple of new taping formats this fall, will rise 4% to $9.6 million. Growth for TVs, VCRs, and other video equipment will be sluggish, up just 2.3% to $12.4 billion. Will hand-held computers be another U.S. vs. Them? Ask Tandy, which is developing its model with Japan's Casio, or Motorola, working with Samsung of South Korea. Says Glazer: ''This will be a real example of alliances between American companies and Asian companies.''

-- DRUGS: Headachy. America's pharmaceutical manufacturers, addicted to a decade of stellar profit growth, are preparing for withdrawal. Says Oppenheimer analyst Steven Gerber: ''We're going to see drug earnings growth go below 15% in many cases. Outstanding performance will be judged to be in the middle to upper teens instead of the 20%-plus superstar companies were able to chalk up for so many years.'' Gerber puts profit growth for the industry at 16% this year and 15% in 1993; sales will climb about 9% both years. Washington gets some of the blame for the change, says Hemant K. Shah, an independent consultant in Warren, New Jersey. Congress has threatened to curtail the tax credits some 25% of the leading pharmaceutical houses get for locating plants in Puerto Rico if companies raise prescription drug prices faster than the consumer price index. The marketplace is also providing discipline. Huge institutional customers like HMOs and mail-order pharmacies are demanding price breaks the individual consumer never could. Gerber figures that one-quarter of the U.S. population receives institutional health care, nearly double the proportion in 1987. In another blow, an unusually large number of products will go off patent over the next 18 months -- for example, Syntex's Naprosyn, an arthritis painkiller. And although Merck's long-awaited Proscar, a prostate enlargement treatment, could finally get approved later this year, the other blockbuster on the horizon, a migraine treatment called Imitrex, will be an import from Glaxo in the U.K.

-- COMPUTERS: Customer-friendly. Manufacturers can count on modest revenue gains as corporate America raises capital spending this year, but the big winners will be companies that teach users to make the best of their systems already in place. The market research firm Dataquest estimates that U.S. hardware revenues, down 13% last year, will tick up a mere 1% in 1992, then rise 8% in 1993. Dataquest senior analyst Nancy Stewart says cheaper and more powerful workstations, with sales up 8% this year and 44% next, will keep eating into the mainframe and minicomputer markets. Says David Moschella, senior vice president of worldwide research at International Data Corp.: ''There's excess hardware capacity across the board.'' One reason: Companies are concentrating on trying to get more value out of what they have. That's why Dale Kutnick, president of Meta Group, a consultancy in Westport, Connecticut, forecasts 15% to 20% growth for software packages and services that show companies what to do with them. ''It has nothing to do with economic recovery,'' he says. ''Software is an enabling technology.'' Microsoft will continue to lead the independent software makers, but there will be plenty of pie to share with other players, such as Novell and Lotus Development. In systems management, companies like EDS will benefit from the trend. IBM, whose service business gets top marks from analysts, will gain too, but that business is too small to drive a Big Blue turnaround.

-- INDUSTRIAL EQUIPMENT: Gearing up. The capital goods market will crank back to life over the next 18 months, but not as a single, well-oiled machine. Already recovering and headed for a bright and busy 1993 are makers of heavy- duty trucks, forklifts, machine tools, and other hardware directly related to industrial production and transport. Wertheim Schroder analyst Mitchell Quain predicts 1992 sales growth of 13% for such companies, including Cummins Engine and Terex, and better than 15% in 1993. Other equipment makers -- those that build oil-drilling and paper-processing machinery, like Cooper Industries and Harnischfeger -- will recover more slowly. Profits will grow much faster than sales, thanks to cost cutting as well as to rising demand and firmer prices. Morgan Stanley analyst John Mackin follows 12 major capital goods companies, including Caterpillar, Deere, and Ingersoll- Rand, which he says make up a fair representation of the sector. For his dozen, Mackin projects bounding profit growth of 80% in 1992 and 90% in 1993. Exports will help many companies. Alexander Blanton, an analyst with Ingalls & Snyder, sees opportunities for construction equipment makers in particular. The annual global market for such gear is worth $15 billion to $20 billion -- including Eastern Europe and the Third World. Says he: ''There's a lot to do over there.''

-- AEROSPACE: The price of peace. Now more than ever it's the plowshare end of the business that pays dividends. Thanks to the popularity of its 737 and 757 aircraft, Boeing will see record profits this year of $1.7 billion on sales of $29.5 billion, says C.J. Lawrence analyst Howard Rubel. Revenues will dip slightly in 1993 to $28 billion, but cuts in R&D spending should keep earnings up around $1.8 billion. And the company has increased its world market share for commercial planes from 60% to 63% at the expense of McDonnell Douglas and Airbus Industrie. Partly as a result, revenues for McDonnell will shrink 9.7% in 1993, to $16.8 billion. Boeing's long term looks good: Shearson Lehman Brothers analyst Gary Reich foresees a ''rush'' to buy new aircraft toward the end of the decade as new federal noise-pollution standards take effect. No such luck for swords. David Vadas, an economist with the Aerospace Industries Association, predicts sales of about $140 billion in 1992, up 3.7% over last year. Old programs and contracts for McDonnell and General Dynamics are likely to sustain that kind of growth for another couple of years. But with no new major ones in the offing, says Vadas, ''the U.S. aerospace industry will face more challenges in the next ten years than it has in the last 40.'' Growing international business, like recent orders from South Korea and Japan for F-16-derived fighter aircraft, won't fill the gap.

-- METALS: Lackluster. Big Steel still can't get the lead out. Last year the six major producers lost a total of $2.1 billion; this year they will break even or at best make a slight profit, according to John Jacobson, an analyst with AUS Consultants in Philadelphia. Shipments will be up 4% to over 82 million tons, and prices are finally starting to rise, but the bases are so pitiful in each case that the improvements are less impressive than they seem. With construction and other markets depressed, ''it's going to be a bare-bones year,'' says Jacobson, with no real excitement until probably the second half of 1993. He predicts shipments of 83 million tons next year, with corresponding price increases of some 5%. Long-term changes to watch for: As ''minis'' like Nucor move into the flat-rolled market -- once the sacrosanct domain of big, integrated producers -- ''the integrateds will become dodos.'' So says Wheat First analyst Louis Hannen. . Nonferrous metals will be dull too. The former Soviet Union has shunted huge quantities of aluminum into export markets now that the military needs less -- it used to buy 50% of domestic output. The result: Aluminum inventory on the London Metal Exchange, some 1.3 million tons, is nearly four times what it was a year ago. That will keep price increases down to a mere 2 cents per pound this year, to 62 cents, according to Smith Barney analyst William Siedenburg. He sees a modest rise to 67 cents in 1993. Copper prices, says Siedenburg, bottomed out in January and will average $1.03 a pound this year, then inch up to $1.07 next year. World supply is up almost 20% since 1988.

-- PAPER: Jammed. Two-by-fours and wooden beams are supporting U.S. wood and paper manufacturers. Credit the housing revival, particularly in single-family homes -- which usually require twice as much beam lumber and three times as much plywood as a unit of multi-family housing, according to Nomura Research Institute analyst Joshua Zaret. Wood prices should be up about 20% this year and 5% in 1993, says Zaret. He sees strong earnings growth at companies like Georgia-Pacific and Willamette Industries, which also make containerboard -- the next product group to improve as industrial shipments crank up later this year. But a combination of overcapacity and slow growth will keep short-term earnings soggy at the likes of Mead and Champion, whose coated papers house annual reports and slick magazines like the one you're reading. For the ten companies he looks at, Paine Webber analyst Larry Ross sees combined earnings growth of only 1% for 1992. Next year will bring a 93% surge, ''but don't get too excited,'' says Ross. ''It's like making a penny one year when you should have made a dollar, then making two pennies the next year -- when you also should have made a dollar.'' Ross points out that while advertising-dependent coated-paper sales will pick up in 1993, history suggests that the lingering effects of previous overexpansion will keep profit growth lagging behind the average for U.S manufacturing.

-- CHEMICALS: Unstable. The industry is still paying for the overexpansion of the late 1980s. Fred Siemer of Chemical Research, a newsletter in New York, figures makers are operating at about 80% of capacity, vs. the 85% to 90% necessary to see strong earnings gains. Still, he expects improvement over the next 12 months for fibermakers like Du Pont and Monsanto. Says Siemer: ''As the recession ends, consumers go out and buy sweaters and blouses.'' Duff & Phelps analyst Matt Robbins expects capacity use to approach 85% by the end of next year. He predicts that big commodity producers will average 20% earnings gains this year and next. New products will help -- for example, an innovative polyethylene from Quantum that can be used to make ultrathin but strong garbage bags. Specialty producers such as Betz Laboratories and Imcera Group got through the recession in fair shape; the group should see income gains averaging 10% this year and 15% next. Some companies will also get a perverse payoff from environmental regulations that are crimping the production of chlorine. Caustic soda, a co- product of the production and a commonly used reagent, will become costlier as a result. Exports will provide further help. The huge U.S. trade surplus in chemicals will hold steady at about $19 billion this year, according to W. H. Clark, the industry's chief trade adviser and CEO of specialty-chemical maker Nalco.

-- OIL AND GAS: Russian roulette. The dismal first quarter for oil companies, says Thomas Petrie of the Petrie Parkman & Co. investment research firm, reflected ''the last of the old order.'' Good fundamentals, a la Econ 101, are now in place: Economic recovery is firing up world demand, and the Saudis are keeping a lid on OPEC supply. A barrel of West Texas intermediate topped $22 after Memorial Day, up from just under $18 in January, and prices should stay in that region in months to come. Arthur L. Smith, chairman of the John S. Herold research and consulting firm, estimates that at this rate industry profits could rack up a net gain of more than 40% for the year. Several unknowns could still rock the rigs, among them the situation in the former Soviet Union. Ted Eck, Amoco's chief economist, says that demand seems to be dropping as fast as production there, but the balance could shift either way, tightening world demand or adding to supply. Says Smith: ''The longer the CIS countries stumble about, the better for the Western oil companies.'' Iraq's possible reentry into the market later this year could also soften prices. Even if it doesn't, the price will still be too low to spur any increase in U.S. production. Natural gas prices finally rebounded this spring on what Eck calls ''classic market overreaction'' to exceedingly low prices at the start of the year. A cool spring kicked in, lifting demand in the Northeast just as gas storage was falling. Production rose about 4% last year and could pick up by 3% this year, according to Eck. Though prices could soften again, says Petrie, ''with the powerful bounce off the bottom, we've come through a watershed.''

-- TELECOMMUNICATIONS: Recovery calling. When economic good times roll, Ma and the Babies must be there to grease the wheels. Says David Yedwab, vice president at Eastern Management Group, a research and consulting firm: ''Once world trade starts, the information to support it grows faster than the trade itself.'' Goldman Sachs analyst Robert Morris estimates the Baby Bells will tally 3% more in earnings this year, and 4% to 5% more in 1993. AT&T, MCI, and Sprint will see 15% to 20% growth from the rotten 1991 level, then 10% to 12% next year. The locals will also benefit from the time they've had to digest recent acquisitions and new cellular ventures, says Morris. Pacific Telesis, for one, has been hurting from California's recession and the costs of starting up cellular service in Germany, but ''should see a double pickup in 1993.'' Morris estimates the number of U.S. cellular customers may increase 35% in 1992, with a 3% to 4% revenue gain when you figure in falling rates. Cellular phones are beginning to encroach on the coin phone business, and Morris bets that as technology improves, they'll eventually become tough competition for local service. Yedwab believes long-distance growth will outpace the recovery: ''The major carriers have gotten their cost structures down so any increase in usage goes right to the bottom line.'' William Redman, vice president at the Gartner Group research firm, says ''the fun stuff'' will come after 1993 when the phone companies start to compete in new areas such as information services.

-- PROFESSIONAL SERVICES: Niche markets. T. Robert Storevik, a director at the Robert Half International search firm, is looking for ex-FBI specialists. They're wanted as forensic accountants to investigate missing assets, money laundering, and embezzlement. While large accounting firms may be contracting, litigation support and bankruptcy-insolvency services are growing. Says Storevik: ''Specialists in the niche markets aren't having trouble.'' Environmental litigation support is another hot spot for CPAs, as is work in biotechnology, health care, and the international arena. ''We have a need for ) Japanese-speaking accountants,'' says Storevik. Rick Telberg, editor of Accounting Today, estimates that 1992 revenues for accounting, auditing, and bookkeeping services will be up 2% to 3%, to about $36 billion; employment will increase less than 2% to 550,000. ''Next year will be a rerun of 1992,'' he says. ''This is a severely mature business.'' Demand for consultants is picking up again, says Edward Hendricks, president of the Association of Management Consulting Firms. The hot areas include overseas ventures, health care costs, information systems, and human resources. And there's still plenty of work in right-sizing. Hendricks estimates that 1992 domestic revenues for his industry should be about 10% higher than last year's $13.5 billion. International revenues should provide another $5 billion this year and $6 billion next. Robert Safian, executive editor of American Lawyer, says attorneys are finding lots of work overseas too. Stateside, things are tougher. More clients are demanding that firms share the risk by starting with lower billing rates and getting a bonus when a case is won. Revenues for the highest-grossing law firms increased just 3% in 1991. Next year should be better, but, says Safian, ''the upturn is hardly robust, and layoffs of both associates and partners may continue.'' Advertising forecaster Robert Coen of McCann-Erickson Worldwide believes that the worst has passed for his industry. Although Olympics advertising hasn't been as much of a boon as expected, 1992 revenues should be $132.7 billion, up 5%. That's more than a percentage point down from Coen's prediction earlier in the year, he acknowledges, in part because ''local retailers are still plagued by enormous financial problems, and consumers are worried about their jobs.'' As the recovery builds in 1993, Coen estimates, U.S. ad expenditures will rise 7.5% to $143 billion.

-- FINANCIAL SERVICES AND INSURANCE: Rich man, poor man. Brokerage houses are looking at yet another year of record earnings. Based on first-quarter pretax profits of $2.1 billion -- an all-time high -- Perrin Long of First of Michigan, a Detroit securities firm, calculates that the nation's securities firms will earn $6 billion before taxes on revenues of $62.5 billion this year. Profits will drop to $4.8 billion in 1993 on revenues of $62 billion. To be sure, the depressed short-term interest rates that have driven a lot of money into stocks and bonds are likely to rise later this year. But Long thinks demographic changes should keep the flow going. Some three-quarters of the country's personal wealth belongs to people 50 and older. That group is growing fast, and its wealth is increasing still faster. Says he: ''These people have more than they need to live on.'' Would that insurers had as much reason to smile. Duff & Phelps analyst Adam Klauber expects most of them -- property and casualty, health and life -- to be in a funk for the next few years. P&C insurers are still suffering from a 1991 rife with catastrophes, such as the deadly fires in Oakland, and they haven't been able to increase premiums much. Moreover, many life portfolios are loaded with troublesome assets like junk bonds and real estate, which will hamper earnings growth for the next few years. Mergers and consolidation could be one fix, says Klauber, but national insurers first have to get flocks of state regulators to approve -- no easy task.

-- BANKS: Better all the time. With payments on deposits running well below 5% and credit quality improving, the worst is over, says David Berry of Keefe Bruyette & Woods, the leading banking research firm. Standard & Poor's bank analyst Tanya Azarchs expects fewer defaults on credit card debt as the unemployment rate drops, so the money-center banks that dominate the business will be less burdened by loan-loss provisions. Berry says the median proportion of nonperforming assets -- sour loans -- for the 150 banks he covers is down to 3.03% this year from 3.11% in the first quarter of 1991. Berry expects that figure to continue falling over the next 18 months. The FDIC predicts some 200 banks, with aggregate assets of $86 billion, will close shop in 1992; it has set aside $16 billion in reserves and expects to get the rest from asset sales. The banks' misadventures in commercial real estate will continue to haunt them. Still, Berry expects earnings to rise at least 15% in 1992 and again in 1993. Consolidations and mergers will continue too. The result, says Azarchs: improved bottom lines as banks trim excess functions and strong regional outfits establish their dominance.

-- AIRLINES: Deferred hopes. You'd think the carriers would have nowhere to go but up after last year's $1.9 billion loss, what with no disruptive Gulf war and the end of the recession. But the late spring round of half-price fares may have done the airlines in again. John Pincavage, a partner at the Transportation Group investment firm in New York City, estimates that the % recent rates could cost as much as $1.5 billion, which the airlines will have to make up by selling lots of full-fare seats. For the year he sees $1.5 billion of net losses. The problem is that few outlays are more discretionary than a vacation trip, and consumers are still hurting. Says Standard & Poor's senior vice president Philip Baggaley: ''Before the fare wars, leisure travel had been disappointing, given the lifting of the recession.'' As of early May, domestic traffic was down 1.1%, and international up 34.1% over last year's awful figures. ''If the economy really picks up, you'll have a totally different profile of traffic,'' says Pincavage. ''It could be enough for the airlines to sneak through.'' Air Transport Association senior economist David Swierenga is more optimistic, with a conditional forecast of $300 million in profits if demand increases with capacity and prices climb faster than costs. ''In any event, results will improve,'' he says. ''People will begin to travel, and it won't take deep discounts.'' Oil is another if. Fuel costs are down from last year, but Swierenga points out that a rise of just $1 a barrel would add $560 million to operating expenses.

-- FREIGHT CARRIERS: Marriages of convenience. Your ears don't deceive -- you're hearing more big rigs on the highways and train whistles in the night. Demand for truckload carriers suddenly picked up this spring, as food, consumer, and industrial production got rolling. But Paul Schlesinger, who follows the industry for Donaldson Lufkin & Jenrette, notes that truckers such as Yellow Freight System and Carolina Freight, which transport smaller loads via their national networks, are still struggling with deflated prices and competition from parcel carriers such as United Parcel Service, which are capturing market share. Railroads, too, are cutting into the number of trucks on the road, though not entirely at the truckers' expense. Intermodal -- combination truck and train shipping -- is the buzzword in both industries. Aggressive railroads have been luring trailers off the highways and onto railcars for years; now truckers are striking partnership deals, picking up and delivering at either end and leaving the long haul to the rails. Reason: It's cheaper. Says Alex. Brown & Sons analyst John Larkin: ''Truckload carriers see an inherent advantage in moving 200 boxes with one engineer rather than with 200 drivers.'' Trucking bellwether J.B. Hunt, which first tied up with the Santa Fe Railway ! in 1989, increased its intermodal business 600% last year and now gets almost 15% of its revenues from partnerships with railroads. In April, Consolidated Freightways' intermodal subsidiary started a new service called Con-Quest, a venture with five major railroads. Most long-haul companies are making similar arrangements, and Larkin expects intermodal shipping to double in the next two years. The railroads have won that business -- along with an increasing share of just-in-time manufacturing shipments -- because they've finally gotten serious about improving service. They have also lifted productivity by shrinking the number of people in train crews, a result of a labor-management settlement that Congress imposed last spring. Meantime traffic is picking up with the recovery. In the first 23 weeks of 1992, motor vehicle and equipment shipments showed a 16.6% year-to-year jump, lumber and wood were up 5.8%, grain 5.8%, and chemicals 4.6%, according to the Association of American Railroads. Paine Webber analyst Anthony Hatch figures the six major railroads will see earnings rise 25% this year to $2.5 billion and then 15.8% to $2.9 billion in 1993. A rail strike was imminent as FORTUNE went to press -- over work rules, wages, and health benefits -- but Congress is again likely to keep it short.