Struggling to overcome a severe downturn in its commercial aircraft business, Boeing Co. reported a 43 percent drop in earnings for the third quarter and said revenues for next year would be roughly $2 billion lower than it had expected.
Shares fell $1.65, or 5.1 percent, to $30.50 in trading Wednesday on the New York Stock Exchange.
The Chicago-based aerospace giant reported third-quarter net income of $372 million, down from $650 million a year ago. The company met Wall Street’s expectations of 46 cents per diluted share, according to Thomson Financial/First Call.
Major problems in the U.S. airline industry have pushed down orders for Boeing commercial jets, and relief is nowhere in sight.
Executives told analysts Wednesday to revise future financial estimates to reflect airplane deliveries at the low end of a range they had given earlier.
Boeing, which had expected a turnaround in orders by the second half of this year, now expects deliveries for 2003 to be between 275 and 285 planes. Earlier guidance had been for 275 to 300 planes.
Moreover, executives no longer expect a rebound in 2004, saying instead that deliveries that year will be about even with 2003.
Expected deliveries for 2002 remain at 380 planes, down from 527 in 2001.
As Boeing completes the elimination of about 30,000 jobs because of the slowdown, Chief Executive Philip Condit acknowledged that more job cuts could be on the way.
“I don’t see big numbers, but we will go down some additional amount in head count,” Condit said. He said he is not sure how much of the reduction would come through attrition versus layoffs.
Boeing took $70 million in non-recurring after-tax charges to write down two major investments. The company also recorded $67 million in non-recurring after-tax gains for the divestiture of an equity investment and a favorable tax settlement.
Also included in the results was a $158 million, or 20 cents a share, after-tax charge, announced this month, to revalue assets in its finance unit. That was not recorded as a non-recurring charge, and Boeing could have further write-downs there as the commercial aircraft business continues to suffer.
Revenues dropped 7 percent, to $12.70 billion from $13.69 billion a year ago, hurt primarily by declines in Boeing’s commercial airplane unit. Gains in the company’s space and defense areas helped offset problems in that unit.
Revenues for 2003 will be closer to $50 billion than $52 billion, and the operating profit margin will be roughly 6.5 percent rather than 8.25 percent, the company said.
For the first nine months of 2002, Boeing reported a net loss of $98 million, compared with net income of $2.73 billion in the same period a year ago.
– Tough competition from private-label brands in its core cheese business did little to slow growth at Kraft Foods Inc. Third-quarter earnings jumped sharply on higher volume and cost savings from its acquisition of the Nabisco biscuit business.
The nation’s largest food company saw its earnings in the three-month period ended Sept. 30 rise to $869 million, or 50 cents a share, from $503 million, or29 cents, in the same period last year.
Net revenues increased over the same period last year by 2.8 percent, to $7.2 billion. Analysts had expected the Northfield-based company to earn 48 cents to 51 cents a share, according to a consensus estimate from Thomson Financial/First Call.
“Kraft’s earnings growth in the quarter was driven by higher volume, productivity and synergy savings and lower interest expense,” said Roger K. Deromedi, Kraft’s co-chief executive.
A rapid rollout of new products in categories ranging from meats to biscuits and a change in accounting rules helped Kraft in the quarter. The accounting rule meant the amount Kraft set aside for goodwill fell by nearly $238 million.
The company saw interest costs drop in the third quarter, to $210 million from $256 million a year ago, after paying off $1.5 billion of debt in the past year.
Deromedi said Kraft remained on track to meet estimates of full-year earnings rising by 14 percent to 16 percent, to between $2.00 and $2.05. The company also expects total volume to grow by about 3 percent, according to Betsy Holden, Kraft’s other co-chief executive.
Sales of cheese fell as private labels moved aggressively to win space on retail shelves and woo customers. But operating income in the division nevertheless rose slightly due to lower diary commodity prices and increased productivity.
Kraft shares closed at $37.90 Wednesday, off $1.28, or 3.3 percent.
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– Illinois Tool Works Inc. reported a 23 percent increase in third-quarter net income from continuing operations but warned that its fourth-quarter and full-year results would be lower than expected.
ITW announced net income of $245.5 million, or 80 cents a diluted share, up from $199.1 million, or 65 cents a share, a year ago. Income from continuing operations was 79 cents a share for the most recent quarter, 1 cent a share better than analysts had expected.
The company now expects fourth-quarter diluted-share earnings from continuing operations, which exclude goodwill amortization from acquisitions, to be in the 67 cent to 77 cent range. Analysts had been expecting 82 cents a share, according to Thomson Financial/First Call.
Because of slower growth than expected for the second half of the year, ITW’s full-year earnings per share from continuing operations will be $2.95 to $3.05, down from the $3.02 to $3.22 range it anticipated in June.
Shares of ITW lost $3.95, or 6.3 percent, to $58.49, on the NYSE.
– CDW Computer Centers Inc. reported the highest quarterly sales and earnings per share in the Vernon Hills-based company’s 18-year history. CDW had third-quarter net income of $54.9 million, or 63 cents a diluted share, up from $43.2 million, or 49 cents a diluted share, a year ago. Sales grew 16.1 percent, to $1.15 billion.
“This was a tremendous quarter from all perspectives,” said Chairman and CEO John A. Edwardson. “We experienced sales growth in nearly every product category we sell.”
The report came out after the close of trading.
– Caterpillar Inc.’s third-quarter earnings rose 3.9 percent, as a lower income tax rate offset declining operating profit in the company’s engine group.
The Peoria-based maker of heavy equipment and diesel engines reported net income of $213 million, or 61 cents a diluted share, up modestly from the year-ago quarter’s $205 million, or 59 cents. Revenues, helped by a growing contribution from the company’s financial group, inched up to $5.08 billion from the year-earlier quarter’s $5.06 billion.
Weak economic conditions continue to pressure Cat’s results, however. On a pretax basis, the company’s earnings were $12 million below the year-ago pretax figure.
Cat’s per-share earnings topped by 5 cents the 56 cents a share analysts had been anticipating. In NYSE trading Wednesday, Cat shares rose 78 cents, or 2 percent, to close at $38.76.