Earnings Reports for Feb. 5 & 6
— -- Cisco Misses Expectations for the First Time
Computer networking giant Cisco Systems said today its fiscal 2001 second-quarter earnings rose 48 percent but missed Wall Street's earningsexpectations for the first time in several years as the companysounded a note of caution about the economy.
"Cisco missed both on revenue and earnings," said ChuckHill, research director at First Call/Thomson Financial.The company had repeatedly beat Wall Street estimates by apenny a share.
The San Jose, Calif.-based company said its profit before one-time items rose to $1.33 billion, or 18 cents a share, for its fiscal second quarter ended Jan. 27, from $897 million, or 12 cents a share, in the year-ago quarter. Analysts had on average expected Cisco to report pro forma earnings of 19 cents a share, according to First Call/Thomson Financial.
Sales, which had been widely watched for a slowdown, rose 55 percent to $6.75 billion from $4.36 billion in 2000, falling short of Wall Street's expectations for $7 billion to $7.2 billion.
Cisco, which makes an estimated 70 percent of the world'srouters that direct traffic on the Internet, also said it is"cautious" about the market pause.
"While we remain cautious about the implications of a briefpause in the current 10-year expansion of the U.S. economy, webelieve that Cisco has never been better positioned to help ourcustomers solve their two most important business issues:increasing productivity and creating new sources of revenue,"Cisco Chief Executive John Chambers said in a statement.
"We remain confident about the market opportunity ahead ofus over the next three to five years," he added. "Thisconfidence is based on the continued impact of the Internet onproductivity, and just how much more work needs to be donebefore every company is an e-company and a majority of theworld's countries are e-countries.
Chambers warned less than two weeks ago that January'sbusiness was "more challenging than we anticipated," leadingmany analysts to question whether Cisco's and thetelecommunications industry's growth are slowing.
In after-hours trading, Cisco's stock fell to $34-3/8 onInstinet after closing at $35-3/4, up $1-3/16, or 3.44 percent,on Nasdaq. In the past year, the Internet equipmentinfrastructure company's stock has underperformed the Nasdaq100 Index by almost 6 percent.
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Disney Earnings Helped by Theme Parks
Walt Disney, (Disney is the parent company of ABCNEWS.com) reported today a higher than expected rise in fiscalfirst-quarter earnings before one time charges, withimprovements in its theme park business, films and its hit showWho Wants To Be A Millionaire offsetting weaker advertisingsales in its broadcasting business and losses in its InternetGroup.
The Burbank, Calif., company, which owns a film studio, theABC and ESPN television networks and several theme parks,reported a profit of $341 million, or 16 cents a share, for thethree months ended Dec. 31, compared with $278 million, or 13cents a share, a year earlier. The results exclude one-timecharges and assume the same portfolio of assets in bothperiods.
The Wall Street consensus estimate compiled by researchfirm First Call/Thomson Financial was a profit of 15 cents ashare before charges.
Excluding losses of $228 million from its stake in theDisney Internet Group, the company reported a profit of $594million, or 28 cents a share.
Disney announced last week it would shut down itsmoney-losing Internet media network Go.com and dissolve itstracking stock for the Disney Internet Group, converting thoseshares into common stock as of March 20. The company said atthe time it would cut 400 jobs and take more than $800 millionin second-quarter restructuring charges.
For the first quarter, Disney took a one-time charge of$228 million for accounting changes related to its films and a$50 million charge for changes in derivative accounting.
Including those charges, the company reported net income of$63 million, or 3 cents a share, compared with $356 million, or17 cents a share, a year earlier.
Revenues climbed 7.2 percent to $7.31 billion from $6.82billion, on a pro forma basis.
The company's media networks segment, its largest, saw an 8percent decline in earnings, despite a 6 percent increase inrevenue. Disney said broadcasting results declined due to softadvertising, lower ratings and higher programming costs,although these factors were offset by more episodes of its hitABC show Who Wants To Be A Millionaire.
Disney said its theme parks earnings rose 8 percent on a 9percent increase in revenue during the quarter.
Film division results flipped to a profit from a loss inthe year-ago period, on a 15 percent increase in revenues,helped by the release of Toy Story 2 on video and films likeRemember The Titans and Unbreakable.
Consumer products earnings fell 13 percent on a revenuedecline of 6 percent.
The figures were released before financial markets opened.
Along with other media stocks, however, Disney has sunk inrecent months based on weakening advertising sales compared tolast year. The shares reached their 52-week low in December,briefly touching $26.
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PepsiCo Posts Sharply Higher Earnings in Q4
PepsiCo reported a nearly 25 percent increase in fourth quarter earnings on Monday, citing double-digit profit growth in both its snacks and beverage businesses and an extra week of results in the latest period.
The nation's biggest salty snacks maker and second biggest softdrink concern earned $611 million, or 41 cents a share, in thethree months ended Dec. 30 compared with $490 million, or 33 centsa share, a year ago.
Revenue rose to $6.4 billion from $5.7 billion a year earlier.
PepsiCo ends its fiscal year on the last Saturday in Decemberand that meant the latest quarter included 17 weeks compared with16 the previous year. The extra week boosted earnings by $44million, or 3 cents a share, on sales of $294 million.
Without the extra week, it earned $567 million, or 38 cents ashare, on sales of $6.1 billion in the latest period.
Analysts surveyed by First Call/Thomson Financial had beenlooking for earnings of 38 cents a share for the quarter.
"Our strength was broadbased with solid earnings growth acrossevery business, domestic and international," said Roger Enrico,chairman and chief executive.
He said the company expects "consistently healthy results"throughout this year.
Operating profits at the Frito-Lay snacks division rose 10percent in North America and 11 percent overseas if the extra weekis excluded in the latest quarter. The Tostitos and Lay's chipbrands led snack food volume growth in North America,
Pepsi-Cola North America's operating profit climbed 13 percentdespite investment in introducing lemon-lime Sierra Mist and a lineof Dole juice drinks. Pepsi-Cola profits overseas were flat incontrast to a $7 million operating loss last year.
Looking ahead, Pepsi plans several new product launchesincluding Pepsi Lemon Twist and the Code Red flavor extension ofMountain Dew, as well as contributions from its newly acquired SoBenoncarbonated beverages this year.
Profits rose 16 percent at the Tropicana juice division.
For the year, PepsiCo earned $2.18 billion, or $1.48 a share,versus $2.05 billion, or $1.37 a share, a year ago.
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The company has closed its Mobile, Ala. and Camden, Ark.mills, and completed the downsizing of the Courtland, Ala.mill. The closure of the Lockhaven, Pa. mill is proceeding onschedule, IP said.
It also said asset sales are progressing rapidly asInternational Paper focuses on its three core businesses —paper, packaging and forest products. The company has increasedits asset sales target to $5 billion, including timberlands, tobe completed by the end of 2001.
It said it aims to reduce capital spending to $1.2 billionin the year 2001, which is about 60 percent of depreciation andamortization. The capital expenditure program in 2001 is 20percent below the $1.4 billion spent in the year 2000, itsaid.
International Paper makes paper, packaging and wood andbuilding products, as well as being the largest private forestlandowner in the world. It has operations in nearly 50countries, employs more than 117,000 people and exports itsproducts to more than 130 nations.BACK TO TOP
Mad Cow Takes a Bite out of McDonald's
Fast food giant McDonald's said today its fourth-quarter earnings fell 7percent as an outbreak of mad cow disease in Europe pushed theregion's sales down 10 percent and threatened to weaken thecompany's first quarter results.
Net income at the Oak Brook, Ill.-based hamburger maker,the largest restaurant company in the world, fell to $452 million,or 34 cents a share, from $486.2 million, or 35 cents a share, ayear earlier. McDonald's was expected to earn 35 cents a share,according to a recent poll of analysts by First Call/ThomsonFinancial.
McDonald's, which operates nearly 5,500 restaurants in Europe,its second-largest market behind the United States, has sinceNovember seen sales erode amid an outbreak of mad cow disease, orbovine spongiform encephalopathy, on the continent.
BSE is a chronic degenerative disease affecting the centralnervous system of cattle and is believed to be contracted throughfeed containing animal by-products. It has been linked to asimilar brain-wasting disease in humans.
CEO Jack Greenberg said in a statement that he expects adifficult first quarter of 2001 due to continued mad cow concerns,tough comparisons from last year, and an extra trading day in2000.
"We expect the first quarter to be very challenging, due tooutstanding results and an extra trading day in 2000, andcontinuing consumer confidence issues about European beef," hesaid.
The company has been battling public fears with stepped upadvertising and greater promotion of non-beef products.
Sales to Europe, the company's second-largest market behindthe U.S., fell 10 percent in the quarter to $2.21 billion from$2.45 billion one year ago. Operating income fell 17 percent to$267.3 million from $322.2 million.
"Europe got hit pretty hard," said Bear Stearns analyst JoeBuckley, who in June lowered his rating on McDonald's shares toneutral due to broader international concerns, includingfluctuations in the euro. "The problem with mad cow is that it isan unknown. No one knows how long these concerns last."
Systemwide sales, which include sales from restaurants ownedby franchises and those owned by the company, rose to $9.92billion from $9.75 billion a year ago.
Sales in the United States, McDonald's largest market, rose 3 percentto $4.82 billion, from $4.68 billion one year ago. Operatingincome rose 14 percent to $385.3 million from $338.9 million.Sales in Asia Pacific, McDonald's third-largest market, rose 3percent to $1.75 billion from $1.70 billion a year ago.
"Despite a number of operating challenges, our worldwidecomparable sales were positive and systemwide sales increasedseven percent in constant currencies for the year," Greenbergsaid.
The company plans to add about 1,700 restaurants in 2001, hesaid. The company said that 2001 per share earnings were expectedto grow between 10 percent to 13 percent, excluding the impact of foreigncurrency translation.
In the year, it plans to buy back about $1.2 billion in stock,the remainder of a three-year $4.5 billion plan. In 2000, itpurchased $2.0 billion worth.BACK TO TOP
Qwest Tops Wall Street
Telephone and data servicesprovider Qwest Communications todayposted a better-than-expected 44 percent jump in fourth-quarterprofits, propelled by robust growth in Internet, data andwireless telephone revenues.
Qwest, which acquired regional phone company U S West Inc.last year in a $36 billion deal, said in a statement it was ontrack to meet its targets for 2001 revenues and earnings beforeinterest, taxes, depreciation and amortization, or EBITDA, akey measure of a company's performance.
Andrew Hamerling, an analyst with Banc of America, calledthe results "terrific."
"Everything is as expected," he said. "Overall I'd say it'sa great quarter."
The Denver-based company said pro forma profits excludingone-time items rose to $270 million, or 16 cents a dilutedshare, compared with $188 million, or 11 cents a share, a yearago.
The results beat Wall Street expectations of 14 cents ashare, according to research firm First Call/ThomsonFinancial.
"With the initial integration of the [U S West] mergersuccessfully completed, we are on track to meet our expectedgrowth rates," Chairman and Chief Executive Joseph Nacchio saidin a statement.
Qwest said revenues rose 9.9 percent to $5.02 billion. Theincrease was driven by growth of almost 40 percent in Internetand data services.
Wireless revenues rose 90 percent to almost $150 million.The number of wireless customers increased to more than805,000, above the company's target of 800,000 for the end of2000.
Fourth-quarter EBITDA was up 19.7 percent, to $1.99billion.
Shares of Qwest have fallen about 10 percent amid sharpdeclines throughout the telecom sector over the past year. Itsstock has underperformed the Standard & Poor's 500 index byabout 4 percent.
The company also said it expected to double the number ofcustomers for its digital subscriber line (DSL) service, whichprovides high-speed Internet access over conventional phonelines, to 500,000 by the end of the year.
Qwest said it ended 2000 with more than 255,000 DSLcustomers, above its target of 250,000.
It also said it expected to file with the FederalCommunications Commission to enter long-distance service inseveral states by the end of 2001.
It expects to apply to reenter long-distance business inone of the states in its local service area by the summer.
Tavis McCourt, an analyst with Morgan Keegan & Co. Inc. inMemphis, Tenn., said entry into long-distance markets was vitalfor Qwest's growth.
"Certainly they are going to be as aggressive as possibleto make that a reality," he said.
Qwest reiterated that it expected 2001 revenues to be inthe range of $21.3 billion to $21.7 billion and EBITDA to be$8.5 billion to $8.7 billion.
Hamerling, the Banc of America analyst, said the biggestchallenge facing Qwest was to meet its target of 20 percentlong-term EBITDA growth.
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Whirlpool Reiterates Job Cuts
Appliance maker Whirlpool metWall Street's lowered fourth-quarter earnings expectations andaffirmed its global restructuring plan will mean up to 6,000 jobscut in the coming year.
The company said today it expects to trim more than 2,000jobs worldwide as part of the restructuring's first phase, withmore details to be announced within two weeks.
All told, the company shake-up — which will pare 10 percent ofWhirlpool's 60,000-member work force — will result in pre-taxcharges of $300 million to $350 million, with annualized savings of$225 million to $250 million, the company said.
"This will be a year of challenge and opportunity," David R.Whitwam, Whirlpool's chairman and chief executive, said in astatement. "We believe that our strong brands, global platform,innovative products and consumer focus — combined with ourrestructuring efforts and the associated lower cost structure —will produce a strong operational performance and solid financialresults in 2001."
Whirlpool said its fourth-quarter net earnings were $67 million,or $1 per share, compared with $113 million, or $1.51 per share,during the year-ago period.
Analysts surveyed by First Call/Thomson Financial were expecting99 cents per share, having lowered their estimate from $1.42 ashare after Whirlpool issued an earnings warning last month. At thetime, Whirlpool blamed intensified price competition, risingmaterial costs, and slowing or declining demand.
The company said sales during the three months ended Dec. 31were $2.58 billion, down 4 percent from $2.69 billion in theyear-ago period.
It added that it expects its first-quarter performance,excluding charges, to be in line with fourth-quarter earnings of $1per share. Analysts surveyed by First Call/Thomson Financial hadbeen expecting $1.02 per share.
The North American appliance industry has been expected to bedown 7 percent to 8 percent in the fourth quarter versus the sameperiod in 1999, Whirlpool said last month. Earlier companyestimates forecast a fourth-quarter decline in industry shipmentsof 2 percent to 3 percent.
Whirlpool has said its restructuring involves a reduction andreconfiguration of global operations, including the closure of someplants.
For the year, Whirlpool earned $367 million, or $5.20 per share,on sales of $10.33 billion. In the previous year, the companyearned $347 million, or $4.56 per share, on sales of $10.51billion.
Whirlpool is the world's largest manufacturer and marketer ofmajor home appliances. It sells products under 11 brand names inmore than 170 countries. The Benton Harbor-based company has majoroperations in seven states — Arkansas, Indiana, Michigan,Mississippi, Ohio, Oklahoma and Tennessee — and 12 countries,including Canada and Mexico.
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"This will be a year of challenge and opportunity," David R.Whitwam, Whirlpool's chairman and chief executive, said in astatement. "We believe that our strong brands, global platform,innovative products and consumer focus — combined with ourrestructuring efforts and the associated lower cost structure —will produce a strong operational performance and solid financialresults in 2001."
Whirlpool said its fourth-quarter net earnings were $67 million,or $1 per share, compared with $113 million, or $1.51 per share,during the year-ago period.
Analysts surveyed by First Call/Thomson Financial were expecting99 cents per share, having lowered their estimate from $1.42 ashare after Whirlpool issued an earnings warning last month. At thetime, Whirlpool blamed intensified price competition, risingmaterial costs, and slowing or declining demand.
The company said sales during the three months ended Dec. 31were $2.58 billion, down 4 percent from $2.69 billion in theyear-ago period.
It added that it expects its first-quarter performance,excluding charges, to be in line with fourth-quarter earnings of $1per share. Analysts surveyed by First Call/Thomson Financial hadbeen expecting $1.02 per share.
The North American appliance industry has been expected to bedown 7 percent to 8 percent in the fourth quarter versus the sameperiod in 1999, Whirlpool said last month. Earlier companyestimates forecast a fourth-quarter decline in industry shipmentsof 2 percent to 3 percent.
Whirlpool has said its restructuring involves a reduction andreconfiguration of global operations, including the closure of someplants.
For the year, Whirlpool earned $367 million, or $5.20 per share,on sales of $10.33 billion. In the previous year, the companyearned $347 million, or $4.56 per share, on sales of $10.51billion.
Whirlpool is the world's largest manufacturer and marketer ofmajor home appliances. It sells products under 11 brand names inmore than 170 countries. The Benton Harbor-based company has majoroperations in seven states — Arkansas, Indiana, Michigan,Mississippi, Ohio, Oklahoma and Tennessee — and 12 countries,including Canada and Mexico.
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