MCI Income Drops 27%, Less Than Expected
MCI Communications Corp. said Thursday that its second-quarter profit fell a less-than-expected 27% as its strongest sales growth since 1996 helped offset costs and losses in its local phone business.
The No. 2 U.S. long-distance company, which plans to complete its sale to No. 4 provider WorldCom Inc. this summer, earned $204 million, or 27 cents a share, before gains and charges, compared with $280 million, or 40 cents, a year ago. Revenue rose 11% to $5.37 billion. Analysts had expected earnings of 25 cents per share.
MCI is “comfortable” with 1998 earnings estimates, said acting Chief Financial Officer Michael Rowny. The company is expected to earn $1.09 a share, according to First Call Corp.
MCI’s revenue growth was the strongest since the fourth quarter of 1996, and revenue from data and Internet services climbed 24% to $1 billion. Volume rose 12%.
Profit margins grew and at the same time operating expenses rose 17% to $5.01 billion. The company is spending more to build local phone networks in big cities. MCI again had a loss in its local phone business; it declined to disclose the amount.
MCI said its $2.26-billion purchase of Brazilian phone company Empresa Brasileira de Telecomunicacoes, agreed to Wednesday, will add to earnings per share after 1999 and will not hurt profit in that year.
At a Glance
Other earnings, excluding one-time gains and charges unless noted:
INSURANCE
* Cigna Corp.’s second-quarter profit rose 2.2% to $276 million, or $1.27 a diluted share, as revenue rose 13% to $5.32 billion. Cigna, which boosted its per-share earnings by repurchasing 3.75 million of its shares, was expected to earn $1.20 a share.
* General Re Corp. said second-quarter profit from operations rose 5.7% to $253.1 million, or $3.20 a diluted share, beating forecasts by a penny, as the reinsurer slashed costs while premiums fell. The company agreed last month to be acquired by Warren Buffett’s Berkshire Hathaway Inc.
* Jefferson-Pilot Corp., a life and health insurer, said second-quarter profit rose 21% to $90.5 million, or 84 cents a diluted share, beating analyst forecasts of 81 cents.
OTHER INDUSTRIES
* Air Express International Corp. said net income rose 5% to $13.7 million, or 39 cents per diluted share, missing estimates by 3 cents, as revenue fell 2% to $378.5 million.
* Dow Corning Corp.’s second-quarter profit fell 22% to $45.9 million, or $18.36 a basic share, as weak demand from Asia and the strong dollar pulled sales down 5.1% to $630.9 million. Results at the specialty chemical company, a joint venture of Dow Chemical Co. and Corning Inc., were also hurt by higher manufacturing costs. Reorganization costs fell to $9.5 million from $13.3 million at the company, which is under Chapter 11 bankruptcy protection because of lawsuits alleging health problems caused by the company’s silicone breast implants.
* Egghead.com Inc. said its fiscal first-quarter loss widened to $5.5 million, or 24 cents a share, from $1.7 million, or 21 cents, a year ago. Sales plunged 48% to $29.5 million as Egghead closed its retail stores and became an Internet-only seller of computer software and hardware.
* Electronic Data Systems Corp.’s second-quarter profit grew 25% to $239.7 million, or 49 cents a diluted share, beating estimates by 5 cents, but the company warned that earnings for the rest of the year will be lower than forecast because of the recent strikes at General Motors Corp., its largest customer. The provider of computer services said revenue rose 14% to $4.19 billion.
* Republic Industries Inc. said second-quarter profit climbed 80%, as expected, to $127.4 million, or 27 cents a diluted share, as revenue ballooned 74% to $4.37 billion. But the auto retailer warned that it expects 1998 earnings of $1.08 to $1.15 a share, less than the $1.23 analysts expected, because of weak auto rentals. The company also cited a lower profit contribution from its waste-management business following its $1.44-billion initial public offering.
* Tommy Hilfiger Corp. said its pro forma profit jumped 66% in its fiscal first quarter to $28.6 million, or 60 cents a diluted share, far exceeding the 53 cents analysts expected. The apparel company’s latest results include those of recently acquired Canadian and Pepe Jeans USA licensees. Revenue grew 32% to $336.1 million, with particular strength in women’s and children’s clothing.
* USA Networks Inc. said its second-quarter pro forma loss narrowed to $1.3 million, or 1 cent a diluted share, from $10.5 million, or 8 cents, a year earlier. Analysts expected a loss of 5 cents. Revenue rose 15% to $689.9 million.
* Clorox Co.’s shares got a boost as gains in Latin America and lower costs pushed fiscal fourth-quarter earnings well above analysts’ forecasts. Net income at the seventh-largest U.S. maker of consumer products rose 31% to $98.2 million, or 93 cents a diluted share. It was expected to earn 81 cents, the average estimate of analysts polled by First Call Corp., for the quarter ended June 30.
