Profit Warnings Hit Companies' Stocks

From Times Staff and Wire Reports

A barrage of corporate warnings Wednesday about weak earnings hammered the stocks involved, but Wall Street still views second-quarter profit disappointments as the exception, not the rule.

The casualties list Wednesday included garbage firm Waste Management, drug distributor Bergen Brunswig, software firm Sterling Commerce and shipper Airborne Freight.

Even so, earnings tracker First Call said the number of companies that have warned of weaker-than-expected quarterly results totaled just 239 as of Wednesday morning--down from 379 in the first quarter and 493 a year ago.

Chuck Hill, research chief at First Call in Boston, said the trend still suggests that second-quarter earnings overall will be robust. Analysts now expect an 11.3% year-over-year gain, on average, for major blue-chip firms. Final results could be closer to 15%, he said.

Still, that won't help investors caught in these stocks Wednesday:

* Waste Management suffered the biggest one-day hit, plunging $19.63 to close at $33.94--a 37% decline on huge trading volume of 70 million shares--after it said second-quarter profit will disappoint because of a $250-million revenue shortfall in North America.

The company gave no explanation, fueling concerns about its leadership, analysts said. Chief Executive John Drury is recovering from surgery for brain cancer.

"They've been aggressive in increasing their prices," said Edward Okine, an analyst with Forum Capital Markets who rates the stock a "buy." "Some of their customers must have gone on to their competitors."

The firm said second-quarter earnings before merger-related costs will be 67 cents to 70 cents a share, up from 41 cents a year earlier but down from the 78 cents analysts had expected.

Worse, the company said sales weakness will "similarly impact future quarters." It sees full-year earnings of $2.65 to $2.70 a share, versus expectations of $3.01.

* Sterling Commerce shares sank $9 to $26.75 after the company, which makes software for conducting business transactions on the Internet, warned that second-quarter earnings will be 38 cents to 39 cents a share, down from an expected 41 cents.

The company echoed a February warning that 1999 sales will slow as competition heats up and some clients delay e-commerce projects, spending instead to fix the year 2000 computer bug.

* Airborne Freight, parent of No. 3 express delivery carrier Airborne Express, said its second-quarter results will fall as much as 27% short of forecasts because of declining demand for domestic shipments.

The package delivery company said it expects to earn 45 cents to 55 cents a share, less than the average analyst forecast of 62 cents.

Analysts said Airborne's problem is continued weakness in some manufacturing sectors, resulting in lower demand for shipping.

The announcement was made after markets closed. Airborne shares eased 13 cents to close at $27.19 in regular trading.


* ANOTHER WARNING: Drug firm Bergen Brunswig's profit won't meet forecasts. C2

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