Despite recession, companies are beating profit expectations

Companies on Tuesday continued posting second-quarter profits that topped analyst expectations.

The reports fostered a renewed sense of optimism in the market.

"This is the most solid evidence that we've seen that conditions are improving," said Jack Ablin, chief investment officer at Harris Private Bank, referring to the earnings reports.

Caterpillarcat, the world's largest maker of construction and mining equipment, said Tuesday its second-quarter profit tumbled 66% as the recession continued to erode sales of its machines and engines.

But the results blew past Wall Street's expectations and the company boosted its 2009 profit forecast, saying it is seeing signs of stabilization it hopes will lead to economic recovery. It also sees indications that government stimulus plans, particularly in China, "are beginning to work."

The company, a component of the Dow Jones Industrial Average, said its quarterly profit slid to $371 million, or 60 cents a share, for the three months ended June 30. That compares with $1.11 billion, or $1.74 a share, in the year-earlier period.

Revenue dropped 41% to $7.98 billion.

Excluding costs related to job cuts, Caterpillar earned 72 cents a share.

Analysts surveyed by Thomson Reuters, on average, had expected earnings of 22 cents a share on revenue of $8.86 billion. Those estimates typically exclude one-time items.

Coca-Colako, the world's largest beverage maker, posted a 43% increase in second-quarter profit, beating expectations as rapid overseas growth helped offset a sales decline caused by the stronger dollar.

Profit rose mostly because last year's quarter was dragged down by big restructuring charges and asset write-downs.

The seller of Coke, Sprite and VitaminWater said it earned $2.04 billion, or 88 cents a share, in the three months ended July 3. That's up from $1.42 billion, or 61 cents a share, a year earlier.

The company recorded significant one-time charges a year earlier that dragged down comparable profit 40 cents a share, compared with 4 cents a share in charges in the most recent quarter.

Excluding restructuring charges, write-downs and other items, Coca-Cola earned 92 cents a share in the most recent quarter. Analysts expected 89 cents a share.

Sales fell 9% to $8.27 billion, mostly hurt by the strong dollar. Wall Street's revenue estimate was $8.66 billion. Companies that do significant business overseas are hurt by a stronger dollar as sales revenue is translated from local currencies into fewer dollars.

Overseas, case volume grew 5%, including 33% growth in India and 14% in China. In North America, case volume fell 1% but Coca-Cola gained slightly in its share of sales volume. Sales volume of Coke Zero grew 24%.

The company is on track to save $500 million a year by 2011 through restructuring, CEO Muhtar Kent said in a statement. More than half of the savings would be achieved by the end of the year, Kent said.

Lower sales and restructuring charges helped drive chemical giant DuPont's dd profit down 61% in the second quarter, overshadowing a strong showing by its agriculture and nutrition business.

Its adjusted earnings still beat Wall Street expectations.

The chemical maker, one of the biggest in the U.S., called its performance solid given current economic conditions, and CEO Ellen Kullman said the company's efforts to reduce costs and increase productivity are paying off.

DuPont said it earned $417 million, or 46 cents a share, in the three months ended June 30, down from $1.08 billion, or $1.18 a share, a year earlier.

Overall revenue fell 24% to $7 billion from $9.3 billion a year ago and slightly below analysts' forecast of $7.1 billion.

Excluding one-time items, adjusted earnings were 61 cents a share, beating Wall Street's estimate of 53 cents a share.

Drugmaker Merckmrk posted a 12% drop in second-quarter profit, because of lower sales of its cholesterol drugs and several vaccines.

The company said the strong dollar was also a factor, lowering total revenue to $5.9 billion.

The maker of asthma and allergy treatment Singulair and cervical cancer vaccine Gardasil said net income fell to $1.56 billion, or 74 cents a share, from $1.77 billion, or 82 cents a share.

The company said it had restructuring charges and expenses related to its acquisition of Schering-Plough that totaled 9 cents a share. Without that, earnings per share would have been 83 cents.

Analysts polled by Thomson Reuters expected earnings per share of 77 cents and revenue of $5.84 billion.

Results were helped by a 10% decline in marketing and administrative expenses. Moreover, the drugmaker's effective tax rate, excluding special charges and merger-related costs, was 20.4%, a benefit of about 5 percentage points due to favorable tax settlements.

Merck stuck with its full-year 2009 profit forecast of $3.15 to $3.30 a share excluding special items, and its full-year revenue forecast of $23.2 billion to $23.7 billion.

At Schering-Plough sgp, profit jumped 49% in the second quarter, as the company recorded lower one-time costs.

In March, Merck agreed to buy Schering-Plough for $41.1 billion. The combined company would be the second-largest drugmaker in the world by revenue.

The deal is expected to close in the fourth quarter, and the companies said they are cooperating to make the transaction smooth.

Southwest Airlines luv broke a string of three straight losing quarters by scratching out a small profit in the April-June period despite a downturn in travel.

Demand for business travel remains weak, and "we cannot predict a profitable third quarter," said Chairman and CEO Gary Kelly.

Southwest said Tuesday it earned $54 million, or 7 cents a share, in the quarter ended June 30, down sharply from a gain of $321 million, or 44 cents a share, a year earlier.

Excluding one-time items, Southwest said it would have earned $59 million, or 8 cents a share.

Analysts expected profit of 7 cents a share excluding items.

Revenue dipped 8.8%, to $2.62 billion.

United Technologiesutx said its second-quarter profit fell 24% as the diversified manufacturer posted double-digit declines in key businesses.

The diversified manufacturer also cut its revenue guidance for the year and lowered the high end of its profit forecast range.

Net income totaled $976 million, or $1.05 a share, down from $1.28 billion, or $1.32 a share, in same period last year. The latest quarter included 22 cents a share in restructuring costs, and a one-time gain of 6 cents a share.

Revenue slid to $13.2 billion from $15.9 billion.

Analysts expected earnings to be $1.04 a share excluding items on revenue of $13.9 billion.