Chrysler’s Net Income Falls 27%
Chrysler Corp. said Friday that fourth-quarter earnings fell 27%, less than expected, as the company idled factories to convert to new models and offered discounts to fend off new competition for its minivans and other vehicles.
The No. 3 auto maker, the first of the Big Three to report fourth-quarter results, said profit before special items fell to $792 million, or $1.19 a diluted share, from $1.09 billion, or $1.51 a diluted share, in the year-earlier period. The earnings topped the $1.13-a-diluted-share average estimate of analysts surveyed by IBES International Inc.
The decline was Chrysler’s third straight quarterly drop and resulted in a 19% decrease in earnings for the year. That’s expected to be the worst performance among the three U.S. auto makers, a reversal from recent years when Chrysler outdid its Detroit rivals. The company lost market share as well but should rebound this year, an investor said.
“Chrysler was hit in 1997 by certain model changeover and strike problems,” said Seth Glickenhaus, managing partner of Glickenhaus & Co., which owns 5.9 million Chrysler shares. “In 1998, spending for new models is being sharply reduced, and the sales are continuing at a very good pitch.”
Chrysler shares fell 69 cents to close at $33.50 on the New York Stock Exchange. They have dropped 13% from their 52-week high of $38.56 last September.
Robert Eaton, Chrysler’s chairman, said 1997 earnings were hurt by higher rebates, heavy spending on new models and a 29-day engine plant strike by the United Auto Workers last spring. He said the company is “well-positioned for 1998,” and that he’s “quite comfortable” with analysts’ estimates that the company will earn $5 a share this year. It earned $4.57 a diluted share from operations in 1997.
Chrysler beat earnings estimates in part because it changed its pension accounting, which boosted per-share earnings for the quarter by 9 cents a share.
Chrysler’s U.S. sales dropped 5.7% in 1997 to 2.3 million. Its U.S. and Canada market share fell to 15.1% for the year, from 16.1% in 1996. However, Eaton predicted the company will regain at least a point of market share in 1998.
Financial turmoil in Asia won’t have a material impact on the company’s earnings, Eaton said.
At a Glance:
Iomega Corp. said fourth-quarter earnings fell below analysts’ estimates and said it would triple advertising spending in 1998.
The disk drive maker said fourth-quarter earnings rose to $36.1 million, or 13 cents a diluted share, from $20.4 million, or 7 cents, a year earlier, falling short of the 16-cents-a-diluted-share average estimate of six analysts surveyed by IBES International Inc. The company blamed the shortfall on slower sales in Asia brought on by the economic crisis.
Shares fell 20 cents to close at $8.81 on the New York Stock Exchange, after falling $9.02 to $12.75 on Thursday. The company told analysts it lost about $120 million in revenue because of the slowdown in Asia and delayed shipments of some of its Jaz 2 drives.
Gateway 2000 Inc. said its net income in the fourth quarter rose 5.4% to $92.91 million, or 59 cents a share. In the last three months of 1996, Gateway earned $88 million, or 56 cents per share. Fourth-quarter sales reached $1.98 billion, a 28% increase, from $1.55 billion a year ago. Also on Thursday, Gateway 2000 announced that Jeffrey Weitzen was elected president and chief operating officer.
Xerox Corp. said fourth-quarter profit rose 23%, beating estimates, as sales of newer digital copiers offset a rising dollar that will continue to crimp sales this year. Net income rose to $525 million, or $1.46 a diluted share, from $426 million, or $1.18 a year ago. Xerox was expected to earn $1.40 a diluted share, the average estimate of analysts surveyed by IBES International Inc. Revenue rose 6.6% to $5.41 billion, from $5.08 billion. It would have risen 10%, excluding the dollar’s effect.
Fortune Brands Inc., the consumer products company whose brands include Titleist golf clubs and Jim Beam whiskey, met Wall Street estimates for a higher fourth-quarter profit. Earnings before charges rose to $86.7 million, or 49 cents a diluted share, from $72.9 million, or 42 cents, a year ago.
Mead Corp.’s fourth-quarter net income rose 8.9%, led by a strong increase in operating profit at its packaging and paperboard unit. The paper products maker’s net income rose to $31.8 million, or 30 cents a diluted share, from $29.2 million, or 28 cents, in the year-ago quarter.
IBP Inc., the world’s largest producer of fresh beef and pork, said its fourth-quarter earnings jumped 19% to $21.7 million, or 23 cents per share on a diluted basis, compared with $18.2 million, or 19 cents per diluted share, a year ago.
