UAL Beats Estimates, Then Sounds a 2nd-Half Warning

UAL Corp., parent of the world’s largest airline, on Wednesday reported better-than-expected profit for the second quarter but warned that earnings for the second half of the year would fall below Wall Street expectations, sending airline shares sliding.

The United Airlines parent cited lower capacity levels caused by schedule reductions and flight cancellations plus higher wages in cutting its earnings outlook.

Delays in air traffic have been high in recent months due to difficult weather patterns and limits on the U.S. air traffic control system. But United has also had to cut its schedule and delay flights due to its own labor problems, lowering revenue and raising costs.

UAL sees third-quarter earnings running between $2.60 and $3.20 a share. Analysts had been looking for $3.55 a share, according to First Call. For the full year, the company expects results as low as $8.25 a share, less than the $9.95 average estimate.

Shares of UAL fell $6 to close at $53.25 on the New York Stock Exchange. It was the biggest one-day drop since the carrier announced its $4.3-billion plan to buy US Airways Group Inc. in May.

Other airline shares followed UAL down, although analysts called the reaction a misread by the market, and most shares rebounded somewhat from their intraday lows.

Shares of AMR Corp., parent of American Airlines, the No. 2 carrier, closed down $1.38 at $31.50, even though it reported second-quarter earnings that handily beat estimates.

“To extrapolate an overall industry slowdown from United’s comments would be a classic mistake,” said Sam Buttrick, airline analyst at PaineWebber. “United’s pain is American’s gain.”

He and other analysts said problems at United could be turned into an advantage by rival carriers, and called the sell-off overdone.

Shares of Delta Air Lines Inc., set to report earnings today, fell $3.88 to close at $53.63. Northwest Airlines Corp. shares fell $1.31 to close at $34.69.

For the second quarter, UAL said earnings rose 17% to $408 million, or $3.47 a share, excluding one-time items, as it enjoyed strong demand for summer airline travel. Revenue rose 13% to $5.11 billion. Analysts had expected $3.24, according to First Call/Thomson Financial.

AMR posted a 32% increase in second-quarter earnings to $285 million, or $1.75 a share, easily beating the analysts’ consensus of $1.57 a share. Revenue rose 10% to $5.01 billion.

US Airways said earnings fell 41% to $80 million, or $1.17 a share, well below forecasts of $1.39 a share. Revenue rose 6% to $2.43 billion.

Trans World Airlines Inc. said its second-quarter loss narrowed to $4.2 million, or 8 cents a share, from $5.3 million, or 17 cents, a year ago, a far better performance than the 33-cent loss analysts expected. Revenue climbed 10% to $954.9 million.

At a Glance

Other earnings, excluding one-time gains or charges unless noted, include:

FINANCIAL SERVICES

* Chase Manhattan Corp.’s second-quarter profit fell 10% to $1.22 billion, or 95 cents a share, as a stock market slump cut the value of its investments in Internet and other start-up companies, and revenue from consumer banking barely rose. The results beat forecasts of 83 cents. Revenue in Chase’s national consumer services division, which includes consumer banking and credit cards, rose just 1%. In an apparent effort to improve that unit’s performance, the bank on Wednesday named David Coulter, former Bank of America chairman and chief executive, to head the division.

* Citigroup Inc., the largest U.S. financial-services company, said second-quarter earnings rose 23% to $3 billion, or 87 cents a share, better than the 83 cents analysts expected, on higher lending to companies and cost-cutting. Revenue was up 10% to $16.4 billion. Income at Citigroup’s corporate and investment bank, which includes Salomon Smith Barney Inc., grew 24%. The consumer business division’s profit rose 22%, and earnings from private banking rose 11%.

OTHER INDUSTRIES

* ACNielsen Corp., the world’s No. 1 market researcher, said second-quarter profit increased 6.7% to $22.3 million, or 38 cents a share, a penny better than estimates, as revenue increased 5.5% to $401.8 million.

* Cendant Corp.’s second-quarter earnings rose 13% to 26 cents, excluding special items and the operations of its Move.com real estate Web site, beating estimates of 24 cents, on strong performance across its franchise businesses and cost-cutting. Including the special items, net income was down 80% to $175 million, or 24 cents a share, from a year ago, when Cendant booked large gains on selling assets.

* Coca-Cola Co. said second-quarter profit rose 27% to $1.2 billion, or 44 cents a share, beating forecasts of 41 cents, as it benefited from increased sales in Europe, Latin America and Asia.

* General Dynamics Corp., the U.S. Navy’s largest shipbuilder, said second-quarter profit rose 17% to $204 million, or $1.01 a share, beating estimates of 98 cents. Revenue rose 25% to $2.62 billion. Profit in the aerospace division, which includes Gulfstream, rose 30% as sales grew 16%. In the information-technology unit, sales climbed 143% and profit doubled. The marine division’s profit fell 6.8% while sales rose 12%.

* Harrah’s Entertainment Inc., said second-quarter profit slipped 1.5% to $47.2 million, or 40 cents a share, missing forecasts of 44 cents, as gambling winnings fell at its Rio Hotel & Casino in Las Vegas and as expenses rose. Revenue rose 17% to $879.2 million. Harrah’s also had a loss at its New Orleans casino, which it controls through a 43% stake in JCC Holding Co.

* Linens ‘n Things Inc., a home accessories and housewares chain, said second-quarter profit rose 35% to $6.9 million, or 17 cents a share, a penny better than forecasts, as sales jumped 25% to $339.7 million.

* Liz Claiborne Inc. said second-quarter profit edged down to $31.5 million, or 58 cents a share, from $31.6 million, or 50 cents, a year ago, but beat the 56 cents analysts expected. Sales rose 8.9% to $661.7 million. Costs rose as the company increased spending to develop and introduce new clothing under the DKNY, Niki Taylor and Kenneth Cole labels, analysts said.

* McGraw-Hill Cos. said second-quarter earnings rose 20% to $107.9 million, or 55 cents a share, beating forecasts by 3 cents as revenue grew 10.5% to $1.02 billion. The company benefited from higher demand for schoolbooks as well as strong profit growth from Business Week and its television stations as well as its Standard & Poor’s bond-rating agency.

* Nabisco Group Holdings Corp., owner of 80.5% of snack maker Nabisco Holdings, said second-quarter net income grew 29% to $76 million, or 23 cents a share. The company agreed last month to be bought by its former cigarette arm, R.J. Reynolds Tobacco Holdings Inc. Nabisco Holdings Corp., which is being acquired by Philip Morris Cos., said second-quarter earnings rose a better-than-expected 29% to $98 million, or 37 cents a share. Analysts had forecast 33 cents on average, according to First Call/Thomson Financial. Sales rose 12% to $2.26 billion, helped by acquisition of some candy brands.

* Tribune Co., in its first earnings report since buying Los Angeles Times parent Times Mirror Co., said second-quarter profit rose 14% to $119 million, or 44 cents a share, driven by strong results in its television operations. The company, which also owns the Chicago Tribune and the Chicago Cubs baseball team, said sales climbed 79% to $1.33 billion, boosted by the inclusion of the Times Mirror assets. The earnings exceeded the 42-cent analyst estimate. The forecast was reduced from 49 cents last month after Tribune said the early closing of the Times Mirror purchase would cut earnings by 6 cents. Tribune, which owns 25% of the WB Network, said revenue from its television stations rose 20% to $347.7 million.

* United Technologies Corp. said second-quarter profit rose 22% to $509 million, or $1 a share, beating estimates by 2 cents, on strong growth in its Flight Systems, Carrier air-conditioning and Otis elevator units. Sales rose 15% to $6.96 billion.