DaimlerChrysler Profit Drops Unexpected 0.3%
DaimlerChrysler reported an unexpected decline in profit for the second quarter as competition forced it to boost discounts on Chrysler vehicles and costs mounted for its Smart mini-car.
The auto maker, Europe’s largest industrial company, said earnings excluding one-time charges slipped 0.3% to $1.58 billion, or $1.53 a share, well below forecasts of $2 a share.
Especially disappointing were lackluster earnings from U.S. car and light-truck operations, the auto maker’s single largest unit. The Chrysler arm’s operating earnings rose 1.4%, less than its 9.6% increase in sales.
The German-American company said results were weakened by currency losses and German tax law changes that raised its tax rate.
The maker of Mercedes-Benz and Chrysler cars said that “increasingly intensifying competition” pinched margins and will keep full-year growth in profit from operations at about 6%. This comes even as second-quarter revenue rose 10% to $38.5 billion.
The disappointing results sent DaimlerChrylser shares down $7.44 to close at $77.56 on the New York Stock Exchange.
At a Glance
Other earnings, excluding one-time gains and charges unless noted:
TELECOMMUNICATIONS
* AT&T; Corp. said its profit from operations rose 8% to $1.59 billion, or 49 cents a share, in the first full quarter that reflects its ambitious foray into cable TV with the purchase of Tele-Communications Inc. Analysts were expecting earnings of 48 cents at the nation’s largest long-distance company, according to First Call Corp. Sales rose 6.7% to $15.82 billion, with wire services revenue up 42.4%. TCI accounted for only about 0.3 percentage points of AT&T;’s sales increase.
* MCI WorldCom, the No. 2 long-distance company, said its net income nearly tripled to $857 million, or 44 cents a share, from a pro forma $287 million, or 16 cents, matching estimates. Sales rose 16% to $8.1 billion, with Internet, international and data services accounting for 76% of the growth.
* Frontier Corp., the long-distance phone company being acquired by Global Crossing Ltd., said its profit from operations declined 19% to $37.2 million, or 21 cents a share, as it reduced rates amid tough competition. The results beat estimates by a penny. Sales edged down to $646.8 million from $648.3 million.
HEALTH INSURANCE
* Aetna Inc. said its operating profit rose 12% in the second quarter to $170.6 million, or $1.10 a share, a penny higher than forecasts, as its managed-care operations dropped unprofitable Medicare business and added members. Aetna, the nation’s largest health insurer, also benefited from raising premiums for employer benefit plans. Revenue rose 23% to $5.95 billion.
* Humana Inc. said its net income dropped 46% to $28 million, or 17 cents a share, matching estimates as its members’ medical costs rose faster than premiums. Excluding one-time items, Humana had profit from operations of $5.1 million, or 3 cents. The health insurer said it plans to cut Medicare membership and increase premiums in a move to improve results.
TECHNOLOGY
* Electronic Data Systems Corp.’s second-quarter operating profit rose 18% to $223.7 million, or 44 cents a share, a penny higher than estimates, amid cost-cutting and a surge in new business at the computer services company. Revenue rose 10% to $4.62 billion.
* Ingram Micro Inc. said its earnings declined 8% to $51.7 million, or 35 cents a share, from $56.5 million, or 38 cents, excluding reorganization costs in the latest quarter and charges for noncash compensation a year ago. Revenue rose 37% to $6.8 billion. Although Ingram continues to grapple with lower prices for PCs, the sharp declines of previous quarters have leveled off.
OTHER INDUSTRIES
* Kellogg Co.’s second-quarter earnings rose 7.7% to $154.2 million, or 38 cents a share, 2 cents better than estimates, as it scaled back promotions on cereals. Revenue rose 4.1% to $1.78 billion.
* Loral Space & Communications Ltd. said its second-quarter loss narrowed to $50 million, or 17 cents a share, from $71 million, or 27 cents, a year ago, as sales soared 52% to $378 million. Analysts were expecting a much steeper loss of 23 cents. Loral had warned investors of the loss, blaming the costs of starting the Globalstar satellite-based telephone network, in which it has a 42% stake.
* Minnesota Mining & Manufacturing Co.’s second-quarter earnings rose 9.1% to $421 million, or $1.03 a share, boosted by cost-cutting and a 2.5% increase in sales to $3.86 billion.
* Procter & Gamble Co. said its earnings rose 16% to $799 million, or 55 cents a share, its biggest profit gain in more than four years, on higher sales in Asia and demand for new products. Analysts were expecting 53 cents. Revenue at the household products giant rose 1.9% to $9.45 billion.
* Service Corp. International, the world’s largest funeral home and cemetery owner, said second-quarter earnings fell 22% to $76 million, or 28 cents a share, in line with forecasts, on slower business in Europe. Revenue rose 20% to $830.2 million. The company also warned that earnings for the year will miss analysts’ forecasts.
