Shares of Boeing Co. tumbled Wednesday, weighing heavily on the Dow Jones industrial average, after the Chicago-based aerospace giant missed first-quarter earnings estimates by a wide margin.
Boeing reported a net loss of $1.25 billion, or $1.54 a diluted share, due almost entirely to a charge of $1.83 billion after taxes for goodwill–the difference between what it paid for acquisitions and what the assets are actually worth–something companies had been allowed to write off for as long as 40 years.
A year ago, Boeing had first-quarter net income of $1.24 billion, or $1.45 a share.
It was the first loss by Boeing since 1997, when the company encountered production problems as it attempted to speed delivery of its popular 737 model.
On Wednesday, however, Wall Street was more focused on the company’s financial results before the goodwill charge and other one-time items. That result showed the company earned $602 million, or 75 cents a share, well below the 85 cents per share analysts had expected, according to a survey by Thomson Financial/First Call.
Shares of Boeing skidded lower throughout the day, closing at $45.37, down $3.33, or nearly 7 percent on the New York Stock Exchange.
Revenue rose 4 percent, to $13.82 billion from $13.29 billion.
Despite continuing financial problems in the airline industry, Boeing said it is holding to its projections that it will deliver 380 passenger jets this year and 275 to 300 next year. Nearly 220 are already sold.
While the numbers delivered may not rise, Boeing Chairman and Chief Executive Philip Condit said the mix of deliveries may change due to an improving outlook for the single-aisle 737 and 757 models. That appears to be offset by a weakening in the market for Boeing’s 747 and 767 models.
As a result, Condit said the commercial aircraft division is proceeding with its plans to lay off the rest of the 30,000 workers it had said last fall that it would furlough.
“International traffic was hit harder than domestic traffic worldwide,” Condit said, noting that dual-aisle planes are used mostly on international routes.
“Post-Sept. 11, the low-cost carriers have had the best results and best traffic increases, so airlines like Southwest, Ryanair and Easyjet are continuing to order planes,” he said. All three fly the 737 single-aisle plane.
Despite the somewhat brighter picture for the commercial aircraft division, Boeing was hurt by weakness in its commercial satellite operation and continuing fallout from the terrorist attacks.
The company said it was forced to write down the value of aircraft that airlines returned following the attacks by $24 million, while profit at its space and communications division fell 50 percent, to $42 million. That’s due to continuing problems Boeing is encountering integrating the former Hughes Electronics Corp. satellite division.
“The principal issues have to do with getting Boeing’s best practices into that company,” Condit said. As a result of the problems, Boeing has replaced many of the division’s managers and is in the process of laying off 4,000 of the satellite division’s employees.
The $1.8 billion accounting charge, in fact, is largely attributable to Boeing’s acquisition of the satellite division in 2001 for $3.65 billion.
Some of that may be recovered through negotiations now under way between the companies over valuations that Hughes used to justify the price. Originally, Boeing had been seeking $1 billion from Hughes, but negotiations have lowered the anticipated recovery to $650 million to $700 million.
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“They still are having problems with their commercial satellites, but I don’t know anybody who isn’t,” said JSA Research analyst Paul Nisbet.
– Household International Inc. continues to dodge the pitfalls of a weak economy, reporting an 18 percent increase in net income, to $511.0 million, or $1.09 per diluted share, from $431.8 million, or 91 cents a share, a year ago.
The Prospect Heights-based consumer finance giant beat a consensus of analysts’ expectations by 5 cents a share, according to Thomson Financial/First Call, and shares rose $1.18, or 2 percent, to $60.70 on the NYSE.
Revenue rose 19 percent, to $2.77 billion from $2.33 billion.
And Chief Executive William Aldinger said Wednesday he believes the company will meet its 13 percent to 15 percent earnings per share growth target for the year.
“We anticipate a very manageable credit environment for the remainder of the year,” he said.
That’s an important consideration for a company that specializes in lending to people with poor or lacking credit histories. That industry has been beaten down in recent months by layoffs and other factors that prevent borrowers from repaying their loans.
Household, the industry’s largest independent player, continues to see increases in the percentage of loans that it charges off and records as delinquent.
Aldinger said credit quality was “well within our expectations in light of the continued weakness in the economy.”
– Illinois Tool Works Inc. posted a net loss in the first quarter, thanks to a nearly $222 million charge from writing down goodwill–the difference between what it paid for an acquisition and what its assets are actually worth.
Including that 72-cent-per-share charge, the Glenview-based diversified manufacturer reported a net loss of $23.4 million, or 8 cents per share, compared with a profit of $182.7 million, or 60 cents per share, a year earlier.
Excluding goodwill amortization, ITW said it had income from continuing operations of $194.4 million, or 63 cents per share, compared with $199.0 million, or 65 cents per share, a year earlier.
Those results topped analyst expectations of 60 cents per share; ITW shares slipped 52 cents, to $75.19, on the NYSE.
Revenue fell 4 percent, to $2.20 billion from $2.29 billion.
– Allstate Corp. said first-quarter net income fell 15 percent, to $426 million, or 60 cents per share, from $500 million, or 68 cents per share, a year earlier, but its shares surged after underlying results beat Wall Street expectations.
Operating income dropped nearly 12 percent, in part because the Northbrook-based property and casualty insurance giant set aside an additional $148 million after taxes to bolster reserves for claims from homeowners and other policyholders. The company said that trimmed 21 cents from per-share results.
Allstate’s operating income slipped to $488 million, or 68 cents a share, from $552 million, or 76 cents a share, a year earlier. Those results topped analyst projections by 10 cents, and Allstate shares climbed $2.01, or 5.1 percent, to $41.06 in heavy NYSE trading.
Revenue increased 2 percent, to $7.29 billion from $7.13 billion.
Despite the upbeat results, Allstate officials said they were sticking with earlier projections that 2002 earnings will be in the range of $2.50 to $2.70 a share.
Asked during a conference call with analysts why the company didn’t bump its guidance higher in light of the latest results, Chairman and CEO Edward M. Liddy said: “It’s too soon to declare victory. Based on one quarter, it’s not appropriate to raise the estimate.”
– CDW Computer Centers Inc., a reseller of computers, software and other technology products, reported a slight improvement in first-quarter profit.
The Vernon Hills-based company reported net income of $40.7 million, or 45 cents per share, compared with net income of $40.5 million, also 45 cents per share, a year earlier. Results matched Wall Street expectations.
Revenue grew slightly, to $1.00 billion from $987.2 million.
The first-quarter results included a payroll tax expense of $1.4 million, or 1 cent per share, due to options exercised by the company’s former vice chairman, Gregory Zeman.
The results came after the close of regular Nasdaq stock market trading, where CDW shares fell $2.44, or 4.7 percent, to $49.73.
– Tootsie Roll Industries Inc. reported a 3 percent increase in first-quarter net income, to $12.8 million, or 25 cents a diluted share, from $12.4 million, or 24 cents a share, a year ago.
The Chicago-based candy company said sales grew 4 percent, to $79.0 million from $75.8 million, citing “effective marketing and promotional programs.”
Earnings per share would have been flat were it not for an accounting adjustment that eliminates the amortization of goodwill and other intangibles, though profit was reduced by higher ingredient costs.
Tootsie Roll stock lost 41 cents, to $46.06, on the NYSE.
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– DeVry Inc. beat Wall Street estimates with fiscal third-quarter net income of $18.4 million, or 26 cents a diluted share, up 15 percent from $16.0 million, or 23 cents a share, a year earlier.
The Oakbrook Terrace-based higher education company said revenue rose 14 percent, to $164.8 million from $144.4 million, largely due to a 4.4 percent increase in spring enrollment, to 55,735 students.
The results, which were released after the close of regular NYSE trading, beat Wall Street estimates by a penny. Shares of DeVry lost $1, to $31.