Growing Cloud in 3rd-Quarter Profit Picture
The list of companies that will come up short in the third-quarter earnings tally is getting longer by the day.
On Monday, shares of Dole Food Co. dropped 11% after the world’s largest producer of fresh fruit said it might show a loss for the third quarter because of falling banana prices in Europe.
Overall, U.S. corporate earnings are still expected to surge by more than 20% this quarter compared with the year-ago period, according to First Call Corp., a Boston-based research firm that tracks Wall Street analysts’ earnings estimates.
Still, First Call says, the pace of profit warnings such as Dole’s is off to a “fast start” for the quarter that will end Sept. 30.
With the third-quarter earnings “pre-announcement season” still in its early stages, there have already been 129 negative pre-announcements, according to First Call.
Negative warnings have accounted for 60% of all earnings pre-announcements so far--”somewhat higher than normal,” First Call said. (Some companies also announce in advance when they expect to meet or exceed profit estimates.)
There is little chance that the total of negative pre-announcements this quarter will match the 526 logged in the third quarter of 1998, First Call said. Even so, the total could exceed the 370 of this year’s second quarter.
Westlake Village-based Dole said the best it will do is break even, instead of earning the 13 cents a share that analysts had projected, according to Bloomberg News. Dole shares dropped $2.75 to a 52-week closing low of $21.25 on the New York Stock Exchange.
In addition to the poor prices in Europe, Dole Chairman David Murdock cited costs associated with Hurricane Mitch, which destroyed an estimated 10% of the world’s banana supply last year. He also blamed last year’s California citrus freeze and lower-than-expected flower prices.
On Monday evening, Apple Computer Inc. shares plunged $9.19 to $69.88 in after-hours trading after the computer maker said revenue and earnings for its latest quarter would fall below estimates because the firm could not get enough processors from supplier Motorola Inc.
Then there was the blood bath Friday involving Fort James Corp., the world’s second-largest paper products manufacturer, whose stock plummeted $8.88, or 25%, to close at $26.25 on the NYSE after the company said profit would fall about 25% short of estimates.
Oddly, however, First Call said the paper and forest products group as a whole has experienced major upward revisions in earnings estimates since spring.
Disappointments aside, First Call still projects that aggregate third-quarter earnings will be up 22% from a year ago, based on analysts’ estimates. The optimism is rooted in the strong U.S. economy and the recovery in Asia.
The year-to-year comparisons are considered “easy,” since last fall companies were still feeling the earnings jolt from the Asian financial crisis.
