Earnings Reports for Jan. 18

Caterpillar Posts Increases in Q4, Year-end Earnings

Caterpillar reported a 10 percent boost in fourth-quarter profits today, citing slightly increased sales and better performance from its financial services that also contributed to increased year-end earnings.

The heavy equipment manufacturer reported fourth-quarter earnings of $264 million, up $25 million from the same quarter last year. Earnings per share were 76 cents, up nine cents from fourth-quarter 1999 and easily beating Wall Street's expectations.

Analysts surveyed by First Call/Thomson Financial had expected Caterpillar's earnings to be 64 cents per share.

Fourth-quarter sales were $5.11 billion, a $95 million increase over fourth-quarter 1999. The company said sales volume increased 3 percent. Revenues in the Financial Products division, which includes investments, a financing arm and an insurance operation, increased 11 percent.

For fiscal year 2000, Caterpillar reported earnings of $1.05 billion, up $107 million from 1999. Profit per share was $3.02. Full-year revenues were $20.18 billion, up 2 percent from the previous year.

However, Chairman and CEO Glen Barton forecast another challenging year ahead. He said an expected decline in North American sales should be offset by higher sales in other markets, but profits are expected to be 5 to 10 percent lower than 2000.

"In general, many of the markets we serve will continue to be cyclically depressed with excess capacity and ongoing price pressure," he said.

Peoria-based Caterpillar designs and makes mining, construction and agricultural machinery as well as engines for earth-moving and construction machines. It is the world's No. 1 maker of earth-moving machinery.

Caterpillar operates manufacturing plants in 22 countries.

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Delta’s Quarterly Earnings Fall 54 Percent

Delta Air Lines, which two weeks ago reported a labor dispute with its pilots would reduce revenues, today said its quarterly earnings declined 54 percent, falling below Wall Street analysts forecasts.

Atlanta-based Delta, the No. 3 U.S. airline, said net income for the quarter ended in December was $79 million, or 60 cents a share, compared with $171 million, or $1.22 a share, a year earlier, excluding special items. Delta is in the process of switching to a calendar year from a fiscal year.

Analysts' consensus forecast was 62 cents a share, according to research firm First Call/Thomson Financial.

Revenues rose to $4.02 billion, from $3.68 billion in the year-earlier period.

Last week, Delta asked a U.S. appeals court for an injunction to stop an alleged work slowdown by a number of its more than 9,000 pilots.

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EBay Exceeds Analyst Estimates

Fourth-quarter profits at eBay Inc. beat Wall Street expectations, as the mammoth Internet auction site said it had added a record 3.5 million users in the last three months of 2000.

In the quarter ended Dec. 31, eBay earned $23.9 million, or 9 cents per share, compared with $3.8 million, or 1 cent per share in the year-ago quarter.

Revenues rose 81 percent to $134 million.

Analysts surveyed by First Call/Thomson Financial were expecting 7 cents a share.

"We are extremely pleased with the strength of our business and with the tremendous momentum we have going into the new year," said Meg Whitman, eBay's president and CEO.

EBay said it now has 22.5 million registered users, more than twice the 10 million it counted at the end of 1999. In the fourth quarter alone, users traded $1.6 billion worth of goods.

EBay was bullish on its 2001 outlook, saying its recent $120 million purchase of a majority stake in Internet Auction Co. Ltd., a South Korean online bidding site, likely will help push revenue toward $150 million in the current first quarter and $665 million for all of 2001.

In comparison, eBay's revenues for all of 2000 were $431.4 million, a 92 percent increase over 1999. Excluding the effect of one-time charges and stock-related expenses, the company earned $58.6 million, or 21 cents a share, in 2000, up from $18.3 million, or 7 cents a share, in 1999.

EBay also said this week it is increasing the fees sellers must pay to auction goods on the site, a move aimed at increasing profits and reducing some clutter.

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Recall, Lawsuits Hurt Ford

Ford Motor, the world's second-largest automaker, reported today a 33 percent drop in fourth-quarter operating earnings, largely due to weaker results from its core North American automotive operations.

Ford — struggling to settle lawsuits in the wake of the Bridgestone/Firestone tire recall — said it earned $1.2 billion, or 64 cents per share, in the quarter.

The results exclude one-time charges and the Visteon parts unit that was spun off last summer. Ford took a charge of $133 million, or 7 cents a share, in the quarter for a write-down of assets associated with the Nemak casting joint venture.

The earnings matched Wall Street forecasts of 64 cents a share, according to First Call/Thomson Financial. However, that was after Ford warned last month that weather-related losses in North America and parts shortages in Europe would cut about 10 cents from what was then an earnings estimate of 74 cents a share.

The company earned $1.8 billion, or 83 cents a share, in the fourth quarter of 1999, excluding a charge of $80 million, or 4 cents per share, for a lump sum payment associated with its union contract ratification.

Both the 2000 and the 1999 results were adjusted for Ford's $5.7 billion stockholder stock-cash swap.

Ford said its revenues fell 3 percent in the fourth quarter, to $42.6 billion from $43.9 billion a year earlier.

Ford Chief Executive Officer Jacques Nasser said the automaker will contend with difficult conditions in North America this year. "We will face softening U.S. market conditions in 2001," he said in a statement. "We are focused on improving our cost structure, bringing production in line with demand, generating positive cash flow, and delivering another year of strong financial results."

Despite the difficulties associated with Bridgestone/Firestone's recall of 6.5 million tires, most of which were fitted as standard equipment on Ford vehicles, Ford shares have outperformed those of rival General Motors, the world's No. 1 automaker, by about 32 percent in the past year.

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Microsoft Meets Lowered Expectations

Second-quarter profits at Microsoft Corp. rose 7 percent, meeting analysts' lowered expectations, though the software giant said it will fall short of third-quarter forecasts.

Shares of the company jumped 5 percent in after-hours trading.

Microsoft, which makes the Windows operating system found on most personal computers, said net profits for its fiscal second quarter, which ended Dec. 31, were $2.62 billion, or 47 cents a share, up slightly from the $2.44 billion, or 47 cents a share, a year earlier.

Estimates had been lowered after the Redmond, Wash.-based company warned in December that it expected earnings to be down 5 or 6 percent from earlier expectations.

"Revenue came in a little higher than we had anticipated, so we were pleased with the performance to close the quarter," said Microsoft chief financial officer John Connors.

Microsoft, however, is retaining a cautious outlook on the near future, Connors said. The company reduced third-quarter expectations to 42 or 43 cents per share; analysts had been expecting 44 cents per share.

"The largest uncertainty is just the general state of the United States, and therefore the world economy and what that means for PC demand and technology spending in general," he said.

A steep fall-off in consumer PC buying has hampered industry giants like top chip maker Intel Corp. and PC giant Compaq Computer Corp., forcing them to cut their revenue and profit estimates.

For the six months ended Dec. 31, Microsoft had profits of $4.83 billion or 87 cents per share on revenues of $12.39 billion. In the year-ago period, it earned $4.63 billion or 84 cents per share on revenues of $11.50 billion.

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Nortel Meets Expectations, Turns Cautious in Forecast

Nortel Networks met expectations with a 34 percent gain in fourth-quarter revenues, weathering a broad slowdown in spending on network equipment, but turned a shade more cautious in its robust forecasts for 2001.

The world's top supplier of fiber-optic equipment posted a net loss of $1.41 billion, or 46 cents per share, compared with $172 million, or 6 cents a share, in the year-ago quarter.

Excluding $2.23 billion in costs from Nortel's steady acquisition spree and other one-time factors, Nortel's operating profits came to $825 million, or 26 cents a share, for the final three months of 2000.

Revenues totaled $8.82 billion in the just-ended quarter, up from $6.57 billion in the same period in 1999.

The results matched most Wall Street forecasts, according to a survey by First Call/Thomson Financial, allowing a hefty sigh of relief from investors.

However, much like top rival Cisco Systems did last week, Nortel tempered its enthusiasm about the ability of customers to buy expensive equipment for building and upgrading computer networks, Internet backbones and wireless systems.

The Canadian company said it now expects growth in revenues and operating earnings per share of 30 percent in 2001 — hardly anemic, but at the lower end of the 30-to-35 percent forecast Nortel had reiterated as recently as last month.

"The U.S. market is obviously a lot of concern, as to how quickly the stock market will rebound" and whether the Federal Reserve can cushion the economy's slide with lower interest rates, said John Roth, chief executive of Nortel. But, he added, "In tighter markets, some of the weaker guys usually fall away … . Our customers are paying a a lot more attention to making sure to buy from companies that will be around a while."

For all of 2000, Nortel had an operating profit of $2.31 billion, or 74 cents per share, but suffered a net loss of $3.47 billion, or $1.17 per share. In 1999, Nortel reported an operating profit of $1.43 billion, or 52 cents per share, and a net loss of $351 million, or 13 cents a share.

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Schlumberger Earnings Jump, Meet Expectations

Schlumberger, the world's No. 2 oilfield services company, said today its fourth-quarter earnings more than quadrupled due to high oil and natural gas prices, which drove a gradual increase in oil companies' spending on exploration and production.

Net income from continuing operations rose to $237.9 million or 41 cents per share from $58.5 million or 10 cents per share in the fourth quarter of 1999. Revenues rose 26.7 percent to $2.86 billion. Reported earnings per share were in line with analysts' expectations, according to First Call/Thomson Financial.

After stripping out a one-time charge in the fourth quarter of 1999, earnings per share showed an increase of 78 percent to 41 cents from 23 cents, the company said.

Schlumberger said despite the strong rise in oil and natural gas prices last year, oil companies had been relatively slow to increase their drilling efforts, because they were preoccupied with implementing a wave of mergers that swept the industry and were concerned that the higher prices would prove unsustainable.

Chairman and CEO Euan Baird said Schlumberger expected oil companies to continue to raise their exploration and production spending in 2001 unless a sharp global economic slowdown led to reduced demand for oil and gas.

Higher oil company spending translates into increased revenues for oilfield service companies.

"Total activity in 2001 is expected to be well above 2000 levels as oil companies move more aggressively to explore for and develop new fields and to optimize older fields to improve their productivity and lower their producing costs," Baird said in a statement.

Schlumberger's stock rose some 42 percent last year, more or less in line with the Philadelphia Stock Exchange's oilfield services index which posted a gain of 45 percent.

Although benchmark U.S. oil prices have recently retreated from their September high of over $37 per barrel, recent levels around $30 are still lofty by historical standards and are almost three times the lows reached in late 1998.

Similarly, benchmark U.S. natural gas prices have slipped to just below $7 per thousand cubic feet from a December high of around $10, but this time last year they were below $3.

Analysts expect the world's biggest oil companies to ramp up their international exploration and production spending in 2001 after a period of two to three years in which they have been largely focused on mergers and internal reorganizations.

Up to now the recovery in demand for oilfield services has been largely driven by a surge in drilling for natural gas by smaller independent companies in North America.

In recently published reports, analysts at Salomon Smith Barney and Leman Brothers predicted that oil and gas companies' exploration and production spending would rise by about 20 percent this year, compared with 2000.

Schlumberger ranks second in the oilfield services industry behind Halliburton Co., measured by revenues. Its offerings to the oil industry range from drill bits and pumps to wireline logging and seismic analysis. BACK TO TOP

Sears Tops Estimates

Retailer Sears, Roebuck reported today a 14 percent decrease in fourth-quarter operating earnings, topping Wall Street forecasts, as results were pinched by a slowing economy and higher costs.

Sears, the second-largest retailer behind Wal-Mart Stores Inc., reported net income in the quarter ended Dec. 30, 2000, fell to $639 million, or $1.91 cents a diluted share, compared with $740 million, or $1.98 cents a diluted share.

Fourth-quarter 2000 earnings exclude charges to cover costs associated with the closing of 89 stores and the elimination of 2,400 jobs. With the items, net income was $442 million, or $1.32 per share.

Analysts polled by First Call/Thomson Financial had expected the retailer to report a fourth quarter profit of $1.86 a share.

Total revenues rose to $12.4 billion from $12.1 billion a year-ago. In the last year Sears shares have outperformed the S&P index of general merchandisers that includes rivals Wal-Mart and Target Corp. by about 25 percent.

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Sun Microsystems Bucks Trend With Solid Quarter

Sun Microsystems Inc. reported second-quarter sales that rose 44 percent and profits that met Wall Street expectations.

Sun, which resisted an industrywide trend to lower forecasts for this quarter in the face of economic weakness, said operating earnings, excluding one-time items, were $552 million, or 16 cents per share, after $354 million, or 10 cents per share, a year ago.

Sales at the Palo Alto, Calif.-based firm rose to $5.12 billion from $3.55 billion in the quarter a year ago.

Analysts on average had expected Sun to turn in operating profits of 16 cents per share on sales of $5.29 billion, First Call/Thomson Financial research reported.

The company's high-end computers, which run the networks of so called bricks-and-mortar companies and dot-coms alike, have seen continued demand even as retail consumer personal computer sales flagged.

But investors are watching Sun and its competitors this earnings period for indications of how cautious major companies will be building out new technology infrastructure in the face of an economic slowdown.

"Going forward, we have not changed our message regarding our intention to invest aggressively for market share while, at the same time, delivering on our commitment to generating competitive earnings for our shareholders," Sun's Chief Financial Officer Michael Lehman said in a statement.

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UAL Posts Narrower than Expected Loss

UAL, parent of United Airlines, the world's largest airline, said today it lost $124 million in the fourth quarter as sharply higher fuel and labor costs reversed its year-ago profit, and it forecast a loss for the current quarter.

The loss was somewhat less than analysts had expected. Chicago-based UAL, whose bid to buy No. 6 U.S. airline US Airways Group Inc. is pending regulatory approval, lost $2.41 a share. It reported a profit of $100 million, or 59 cents a share, in the fourth quarter a year earlier. The figures exclude special items.

Analysts had on average expected the company to lose $3.84 a share in the quarter, according to First Call/Thomson Financial.

Revenue rose 6.9 percent, to $4.79 billion, from $4.48 billion a year earlier.

Bookings for the first quarter of 2001 "appear favorable" in comparison with the quarter a year earlier, but higher fuel and labor costs are likely to result in a loss for the period, UAL said. For the full year, UAL expects to post "a modest profit." BACK TO TOP

United Tech's Fourth-quarter Eearnings Rise 18 Percent

United Technologies reported today an 18 percent increase in fourth-quarter earnings, boosted by strong revenue improvements in its world-leading Otis elevator and Carrier air-conditioner businesses.

The Hartford, Conn.-based industrial and technology company, a component of the blue-chip Dow Jones industrial average, said net income rose to $426 million or 84 cents per share, from $362 million or 70 cents a share in the year-earlier quarter.

Analysts on average had forecast earnings of 83 cents per share, according to estimates compiled by First Call/Thomson Financial.

"We turned in another solid quarter, with earnings per share up 20 percent even after a 4-cent adverse foreign-exchange impact," said George David, United Technologies' chairman and chief executive officer.

"Our outlook remains more of the same in 2001, with earnings per share growth anticipated at 15 percent, and available cash flow in the range of net income," David said.

"While the U.S. economy is slowing, UTC's global and product diversity and our continuing and successful efforts to improve performance throughout our operations sustain these expectations," he said.

For all of 2000, diluted earnings per share rose 18 percent to $3.55 on net income of $1.81 billion, from $3.01 and $1.53 billion, respectively, in 1999. The 2000 earnings per share matched Wall Street expectations, according to First Call/Thomson Financial.

Fourth-quarter revenues rose 4 percent to $6.8 billion, from $6.5 billion a year ago.

In addition to Otis and Carrier, United Technologies owns aircraft-engine maker Pratt & Whitney, helicopter maker Sikorsky Aircraft, and aerospace-components firm Hamilton Sundstrand, maker of the NASA space suit.

Operating profit at Otis grew by 14 percent in the quarter on revenue growth of 4 percent. Before the adverse impact of foreign currency translation, however, operating profit rose by 26 percent on revenue growth of 13 percent.

Pratt & Whitney's operating profit rose by 21 percent to $333 million, helped by lower costs in its commercial business and strong performance in its military business. BACK TO TOP

Wall Street expected the bank to earn 45 cents a share in the quarter, according to First Call/Thomson Financial, which tracks analysts' consensus estimates.

J.P. Morgan Chase, which ranks among the top U.S. banks with more than $705 billion in assets, warned last month its fourth-quarter profits would be substantially below Wall Street estimates because of weak trading revenues, higher costs and losses on investments.

A string of interest rate increases by the Federal Reserve last year hurt demand for new bond offerings in the quarter and contributed to a stock market slump that ate into revenues at banks' investment and trading operations.

J.P. Morgan Chase's stock closed at $53-3/16 on Tuesday on the New York Stock Exchange.

J.P. Morgan Chase said trading revenues fell to $1.27 billion in the fourth quarter, compared with $1.48 billion a year ago, mostly due to the impact of widening credit spreads on bond markets, while operating revenues at its investment bank rose 20 percent to $3.67 billion, helped by acquisitions.

J.P. Morgan Partners, the bank's investments arm, posted losses of $92 million, compared with a gain of $1.62 billion a year ago. The losses came as the technology-laden Nasdaq composite index last year posted the poorest performance in its history.

The bank also said in a statement it has set long-term goals of 10 percent - 12 percent annual revenue growth, cash earnings per share growth of 15 percent a year, and an average cash return on equity of 20 percent - 25 percent.

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3M Plans Cost Cutting After Disappointing Q4

Diversified manufacturing giant Minnesota Mining & Manufacturing said today it plans to boost profits by aggressively controlling costs but its stock tumbled following news of disappointing fourth-quarter earnings. Analysts said the earnings shortfall may mean the honeymoon is over for Chief Executive Officer James McNerney Jr. The long-term General Electric executive moved into the top spot on Jan. 1.

"It's a tough position for him, but by the same token, provides him with a clean slate," said Jonathan Rosenzweig, an analyst with Salomon Smith Barney.

The St. Paul-based company said late Tuesday that its fourth-quarter net income was little changed at $447 million, or $1.12 a fully diluted share, below the $1.20 that had been expected in a First Call/Thomson Financial survey of analysts. It blamed the U.S. economy, which slowed in December, plus the strength of the U.S. dollar.

"There [is] a significant slowdown in the U.S. economy," McNerney said in a conference call with analysts. "The magnitude was greater than we anticipated. The adjustments were not fast enough to achieve earnings expectations for the quarter."

The maker of Post-It Notes, Scotch tape, adhesives and abrasives said it still plans to increase 2001 earnings 10 percent by cutting costs, including headcount. No restructuring charge is planned, it said.

Analysts said few specifics were provided about how 3M plans to cut costs. 3M officials were not available to comment further.

On a telephone conference call with analysts this morning, 3M officials said they expect to achieve "significant" attrition in the company's employment levels.

"In terms of planning going forward, what we've got is significant attrition in our forecast over years, clamping down on head count additions," a 3M official said on the conference call. "Overall, headcount will be up slightly because of acquisitions."

The company, which had 74,440 employees as of Sept. 30, generally loses about 2,000 workers, or 2.7 percent, through attrition each year.

Some analysts said they were slightly skeptical about how 3M will achieve its earnings goals.

"It seems like it's going to take quite a bit of cost improvement to get 10 percent earnings improvement with the kind of weak top line they're talking about in the U.S.," said Peter Enderlin, a Ryan, Beck analyst. He noted that overseas volumes, however, so far have been strong.

Others said they are worried that the U.S. slowdown might eventually affect 3M's overseas operations as well.

"The concern going forward from here is what happens to the international revenue. What's the risk that they slowdown?" said Salomon Smith Barney's Rosenzweig.

He said the strength of the U.S. dollar shouldn't have as much of an impact on 2001 earnings as it did last year.

"Obviously the yen works against them, but the euro is working more in their favor than it was," he said.

The translation of foreign profits into U.S. dollars trimmed 5 cents a share from fourth-quarter earnings.

3M's stock, a component of the Dow 30, has outperformed the Dow Jones industrial average by more than 20 percent since about a year ago. Most of those gains came on speculation and the eventual news that 3M would name McNerney, the first outsider to run the company in its nearly 100-year history.

3M said it will issue a more detailed financial statement next week but will not hold another analyst conference call. BACK TO TOP

US Airways Losses Exceed Expectations

US Airways lost $101 million in the fourth quarter, hurt by rising fuel costs and increased competition within the industry.

The airline, which is seeking federal approval of its acquisition by the parent company of United Airlines, reported a loss Wednesday of $1.50 per share for the last three months of 2000.

That was far greater than analysts' expectations of a $1.10 loss per share, based on a survey of analysts by First Call/Thomson Financial. It was also worse than the fourth quarter of 1999, when the company lost $81 million, or $1.16 a share.

Quarterly revenue rose 10 percent, from $2.14 billion to $2.36 billion.

US Airways chairman Stephen Wolf said in a statement that the pending deal with UAL Corp.'s United Airlines will restore the company's financial health. "The economic impact of the truly national and international network that will result from our merger with United bodes well for both the traveling public and the communities we serve," he said.

The Justice Department is expected to complete its review of the merger by April.

For the year, the Arlington-based airline lost $269 million, or $4.02 per share, including charges, on revenue of $9.27 billion. Last year, the company turned a profit of $197 million, or $2.64 a share, on revenue of $8.60 billion. BACK TO TOP

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The Associated Press and Reuters contributed to this report.

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