Weakness Overseas Hits U.S. Earnings
Eastman Kodak Co. shocked Wall Street on Tuesday by reporting a plunge in foreign sales, and beverage giant PepsiCo warned of tougher times for its foreign operations--reminders that the global economic crisis is increasingly being felt at home.
Still, a flurry of third-quarter earnings reports from some of the country’s leading consumer product firms showed some strong gains. Although many firms were hurt by emerging-market woes and the dollar’s strength (until recently), healthy sales in the United States and Europe are in many cases offsetting weakness elsewhere.
Kodak was the day’s biggest negative surprise. The U.S. film leader said that although deep cost-cutting helped boost earnings in the quarter ended Sept. 30 by 52% from a year ago, to $398 million, or $1.21 a share, sales dropped nearly 10% to $3.4 billion.
The company said both U.S. and foreign sales fell in the quarter, but the biggest declines were in crisis-ridden emerging economies. Sales in Russia, for example, plunged 55%; South Korean sales dropped 33%.
“The rate of decline accelerated as we moved through the third quarter,” Kodak Chief Financial Officer Harry Kavetas told analysts during a conference call.
Wall Street, worried about Kodak’s long-term prospects amid an intense global market share battle with Fuji Photo of Japan, pummeled Kodak stock, pushing it down $11.19 to $72.38 on the New York Stock Exchange.
Meanwhile, PepsiCo reported operating earnings for the quarter ended Sept. 5 of $761 million, or 50 cents a share, up 38% from a year ago. But excluding a one-time tax benefit, earnings were up just 2%. Sales rose 3% to $5.54 billion.
PepsiCo said its third-quarter worldwide beverage volume measured by bottler case sales grew more than 5%, with 8% growth internationally--the strongest in more than three years--and 3% growth in North America.
But the company said it suffered from an unexpected summer sales slowdown in its Frito-Lay snack foods unit, despite higher marketing costs.
Moreover, PepsiCo Chairman Roger Enrico said that the company expects “the international environment to become more difficult for our operations in the near term.” He did not elaborate.
PepsiCo shares rose 31 cents to close at $32 on the NYSE. The results were reported near the close of trading.
Among other consumer giants:
* Pfizer Inc., maker of the impotence pill Viagra, said profit from operations rose 15%, to $667 million, or 51 cents a share in the quarter, from $579 million, or 45 cents, a year earlier. Sales rose 21% to $3.33 billion, including $141 million from Viagra.
Higher taxes cut into earnings, Pfizer said. Wall Street, betting on stronger Viagra sales, had expected 57 cents a share. The stock plunged $5.50 to $87.50 on the NYSE.
“Pfizer had a lot of momentum. It was the clear leader,” said Barney Rosen, an analyst with Argus Research. “Now people are going to start to question whether the armor has cracked in this sector.”
* Johnson & Johnson said its quarterly results rose 12%, to $961 million, or 70 cents a share, as sales edged up 2.5% to $5.7 billion.
The numbers met expectations, and the company’s stock rose $1.31 to $77.75 on the NYSE.
Ralph Larsen, J&J;’s chief executive, said that “despite economic turmoil in many parts of the world,” cost-cutting and productivity gains helped propel growth.
* Appliance maker Whirlpool Corp. said strength in its U.S. and European businesses pushed operating earnings up 35% in the quarter, to $78 million, or $1.02 a share. Sales rose 24%. Although Whirlpool said shipments in Latin America fell in the quarter, operating profit there rose 75% from a year earlier, helped by cost-cutting efforts. And while Whirlpool said Asian operations are below break-even, it sees continued improvement in that market.
* Tire giant Goodyear said third-quarter operating earnings of $185 million, or $1.17 a share, were basically unchanged from a year earlier. The company said higher sales in Europe and North America offset weaker results in Southeast Asia and Latin America.
* PC PROFIT: Intel’s earnings beat forecasts. C2
* ROUGH ROAD: GM posts loss; Merrill profit drops. C3
