Ford, GE and IBM lead parade of profit reports

Thursday, Jan. 18, 2001 | 10:57 a.m.

SUN WIRE SERVICES

Ford Motor Co.'s fourth-quarter earnings fell sharply due to weaker U.S. auto sales, but the results matched Wall Street's lowered expectations.

The world's second-largest automaker said today it earned $1.2 billion, or 64 cents a share, before onetime items for the three months ending in December, compared with $1.8 billion, or 83 cents a share, a year earlier.

Analysts surveyed by First Call/Thomson Financial had expected earnings of 64 cents a share, having trimmed that forecast 10 cents after a Ford warning last month.

In early trading on the New York Stock Exchange, Ford shares were up 6 cents at $26.94.

The results exclude earnings from Visteon Corp. -- the parts arm Ford spun off in 2000 -- or a one-time charge of $133 million associated with a writedown of assets related to a joint venture on castings.

Including the special charge, but not Visteon, Ford earned $1.1 billion, or 57 cents a share, for the quarter.

Revenue for the quarter slipped to $42.6 billion from $43.9 billion a year earlier.

Earnings in Ford's automotive operations totaled $762 million, down from $1.4 billion in the year-ago period.

"We will face softening U.S. market conditions in 2001," Jacques Nasser, Ford's president and chief executive, said in a statement. "However, our excellent portfolio of brands, customer focus and commitment to executing our strategies set us apart from our competitors.

While automakers have struggled in recent months to winnow inventories bloated by slackened demand, Nasser said Ford was focused on "improving our cost structure, bringing production in line with demand, generating positive cash flow and delivering another year of strong financial results."

Ford Credit earned $410 million in the fourth quarter, up $101 million from a year ago.

Rental car company Hertz Corp., of which Ford owns about 81.5 percent, earned $56 million in the quarter, down $5 million. Ford's share of Hertz's earnings was not immediately available.

Ford said Tuesday it has reached a $710 million deal to acquire all of the Hertz shares it doesn't already own, with the deal expected to close within months, pending approval from Hertz shareholders and regulators.

General Electric Co., balancing a softening in sales with a ratcheting up of productivity, said Wednesday that its fourth-quarter earnings rose 16 percent even though revenue gained only 6 percent. But the company also said layoffs were likely.

GE earned $3.59 billion, or 36 cents a share, compared with $3.09 billion, or 31 cents a share, in the period a year earlier. Revenue rose to $35 billion from $32.9 billion.

The results were in line with Wall Street expectations.

Unimpressed shareholders sent GE shares down 69 cents, to $46.69. But analysts were upbeat.

"Certainly some units are coping with the weak economy, but GE is acting decisively to protect profitability," said Martin A. Sankey, who follows GE for Goldman Sachs.

That protection may cost thousands of employees their jobs. GE has said it would eliminate as many as 600 jobs at its NBC broadasting unit and that shutting down Montgomery Ward would cost 28,000 jobs.

More layoffs are in the works. "It's clear we will need fewer jobs," GEGary Sheffer, a GE spokesman, GE said Wednesday, citing the economy, use of Internet technology to streamline operations, the acquisition of Honeywell International and the bankruptcy of Montgomery Ward. Analysts suspect that as many as 80,000 jobs are at risk.

IBM

IBM reported quarterly earnings Wednesday that were slightly better than Wall Street's expectations, and perhaps more encouragingly, it told investors that it was "comfortable" with analysts' earnings projections for this year.

Unlike a string of technology companies that have warned investors that a slowing economy has caused them to scale back expectations for 2001, including Intel as recently as Tuesday, IBM said most of its business showed few signs of weakening.

IBM executives said the company's strength overseas, its emphasis on selling a wide variety of services in addition to hardware, and its focus on large global customers that intend to keep investing to expand their electronic commerce capabilities helped shield the company from some of the pressures felt by other technology giants.

In addition, the company said it was benefiting from the rollout of several important new products, including its latest mainframe computer, and payments from other companies eager to use IBM electronics innovations in their own products. Royalty income alone topped $1.6 billion last year, John Joyce, IBM's chief financial officer, said. That figure went beyond the "more than $1 billion" estimate that IBM used in previous reports.

"We look forward to another good year at IBM," said Louis V. Gerstner Jr., the company's chairman and chief executive, in a statement issued with the earnings.

Last year certainly ended on a high note for IBM, the world's largest computer company. It said it earned $2.67 billion, or $1.48 a diluted share, in the last three months of 2000, a 32 percent increase from the $1.12 a share reported a year earlier, when earnings were $2.09 billion. Revenue was nearly $25.62 billion, up 6 percent from $24.18 billion in the last three months of 1999.

The earnings were 2 cents a share more than the consensus forecast of $1.46 reported by First Call/Thomson Financial, which tracks analysts' projections. The revenue projection for the quarter had been $25.5 billion.

But the quarter was stronger than those figures suggest.

Revenue grew 12 percent if the effect of the strengthening dollar on sales in foreign currencies is removed. In each of the company's major businesses, profits and revenue grew faster in the fourth quarter than at any other time in 2000, sending the company into this year with strong momentum.

The news was even better than optimistic investors anticipated. IBM's share rose $3.94, to $96.69, during trading on the New York Stock Exchange Wednesday. The earnings were released after trading ended. After hours, the stock rose as high as $103.44.

Apple Computer

Struggling Apple Computer Inc. posted a first-quarter loss greater than what Wall Street was expecting, but promised a return to profitability next quarter.

For the three months ended Dec. 30, the company lost $247 million, or 73 cents a share, the company said Wednesday. In the year-ago quarter, Apple earned $183 million, or 51 cents per share.

Wall Street analysts surveyed by First Call/Thomson Financial were projecting a loss of 65 cents a share.

Taking into account one-time investment gains as well as some accounting adjustments, Apple's loss was $195 million, or 58 cents a share, the company said.

Revenues for the quarter were $1 billion, down 57 percent from the $2.34 billion of the year-ago period.

The company has been suffering from sluggish sales, increased competition, and a glut of inventory -- problems that some industry analysts predict will not improve in the current quarter despite an optimistic outlook by Apple officials.

Apple has slashed prices of its products in recent weeks and announced a new lineup of products at MacWorld Expo last week, including faster, more powerful models of its Power Mac G4 and a new titanium PowerBook laptop. It also said its new Mac OS X operating system will be bundled with new computers starting in July.

Kodak

Eastman Kodak Co., beset by a sharp slowdown in film sales, posted a 59 percent drop in fourth-quarter profit but its operating results matched Wall Street's lowered forecasts.

The world's largest photography company said Wednesday it earned $194 million, or 66 cents a share, in the last three months of 2000, down from $475 million, or $1.50 a share, a year earlier.

The results include $6 million in after-tax costs associated with closing its Elmgrove manufacturing hub for this quarter and a $120 million gain in the year-ago period from selling a film archive and a scientific instruments business.

Excluding those charges, Kodak said it earned $200 million, or 68 cents a share, down from $475 million or $1.50 a share a year ago. Sales fell 6 percent to $3.56 billion from $3.8 billion.

That matched Wall Street expectations for the latest quarter. Its shares were up 56.2 cents, or 1.4 percent, to close at $41.88 Wednesday on the New York Stock Exchange.

Kodak lowered its earnings projections last month for the second consecutive quarter to reflect a sudden slump in film sales beginning in September that it blamed largely on a slowing U.S. economy. The dip in sales prompted U.S. retailers to cut back film inventories.

Intel

Fourth-quarter earnings at chip maker Intel Corp. beat Wall Street expectations but the company warned that its bottom line would not be impervious to the effects of the slowing U.S. economy.

Helped by strong investment gains, Intel reported income for the quarter ending Dec. 30 of $2.2 billion, or 32 cents per share. Excluding acquisition-related costs, income was $2.6 billion, or 38 cents per share, up from $2.4 billion, or 36 cents per share, in the year-ago period, the company said Tuesday.

Analysts were expecting comparable results this quarter of 37 cents per share, according to a survey of analysts by First Call/Thomson Financial.

Shares of Intel were down 87.5 cents, or nearly 3 percent, to close at $30.50 Wednesday on the Nasdaq Stock Market.

Revenue for the quarter was $8.70 billion, compared to $8.21 billion in the year-ago period.

"This was a year of record annual revenue and earnings; yet, slowing economic conditions impacted fourth-quarter growth and are causing near-term uncertainty," said Craig R. Barrett, president and chief executive officer.

Boeing

Fourth-quarter net income at Boeing Co. fell 27 percent due to several one-time charges, though the results easily surpassed Wall Street's expectations.

For the three months ended Dec. 31, Boeing earned $481 million or 55 cents per share, compared with $662 million or 74 cents per share in the same period a year ago, the company said Wednesday.

Excluding $396 million in one-time charges, primarily due to research and development costs and employee benefit expenses, Boeing earned $877 million, or $1.01 per share.

Analysts surveyed by First Call/Thomson Financial had expected earnings of 91 cents per share.

"They're showing just continuous improvement in the efficiency with which they're going through their manufacturing process, and that has resulted in 10 cents more per share in earnings than the consensus was anticipating. This was despite a very heavy research and development expenditure," said Paul Nisbet, analyst with JSA Research Inc., in Providence, R.I.

Revenues for the quarter were $14.69 billion, down 3 percent from $15.2 billion a year ago.

Boeing said it came within one jet of achieving its target of 490 deliveries in 2000.

Continental Airlines

The carrier earned $44 million, or 70 cents per share, down from $167 million, or $2.42 per shares in the year-ago period.

Excluding special gains and charges, Continental earned $38 million, or 61 cents per share, from $29 million, or 42 cents per share a year earlier.

Analysts surveyed by First Call/Thomson Financial had expected Continental, the nation's fifth-largest carrier, to earn 58 cents per share.

Helped by higher fares, revenue rose 13 percent to $2.43 billion from $2.15 billion. That helped offset a 59 percent increase in fuel costs, which jumped to $412 million.

Revenue from passengers rose 13 percent to a record $2.3 billion. The increases cut across all the carrier's markets, with the largest increase, 18.2 percent, in Latin America.

Continental is under the effective control of Minnesota-based Northwest Airlines, which holds a majority of its voting stock. Continental expects to close a deal Jan. 22 to regain control from Northwest by buying about 6.7 million shares of voting stock for $450 million on Jan. 22 and converting it to common stock.

The two airlines agreed to continue their operating alliance through 2025.

Caterpillar

Caterpillar Inc. reported a 10 percent rise in fourth-quarter profit today on slightly increased sales but its stock dropped as it warned that its profits will decline in 2001.

Caterpillar shares fell more than 7 percent after the heavy equipment manufacturer said profits will decline 5 percent to 10 percent this year on flat sales amid a "difficult global business environment." The stock was down $3.41 a share, or 7.6 percent, to $41.25 a share in morning dealings on the New York Stock Exchange.

Caterpillar reported fourth-quarter earnings of $264 million, or 76 cents a share, up from $239 million, or 67 cents a share, a year earlier.

Analysts surveyed by First Call/Thomson Financial had expected per-share earnings of 64 cents.

Fourth-quarter sales were $5.11 billion, up 2 percent from $5.02 billion for the same period in 1999.