Delta, Alaska Air Group See Profits Drop
Delta Air Lines Inc. and Alaska Air Group Inc. said Tuesday that third-quarter profits fell on higher fuel costs, but Southwest Airlines Co. posted an earnings increase.
Southwest and Delta, the third-largest U.S. carrier, were among airlines best protected against rising fuel costs by the use of hedges, analysts said.
Low-fare carrier Southwest also gained business from America West Airlines, UAL Corp.’s United Airlines and Alaska, which all had delays or cancellations.
Southwest and Delta both saw an increase in passenger traffic. Higher average fares also benefited the carriers as demand for air travel remained strong. Still, carriers faced rising expenses, primarily fuel.
Atlanta-based Delta, the nation’s third-largest airline, said operating earnings declined 3% to $273 million, or $2.08 a share, in the quarter ended Sept. 30, although the results exceeded Wall Street’s consensus estimate of $2.05 a share. Revenue rose 13.5% to $4.35 billion.
Delta’s fuel costs rose 45% to $533 million. Fuel hedging, or buying future contracts on jet fuel or crude oil at preset prices, saved $160 million during the quarter, the company said.
Southwest’s net income rose 45% to $184.3 million, or 35 cents a share, topping analyst expectations of 32 cents. Revenue rose 19% to $1.48 billion.
Southwest said its average fuel cost rose 27%, but it was able to ease the increase by buying some fuel through advance purchases at guaranteed prices.
Alaska Air’s net income dropped 71% to $15.9 million, or 60 cents a share. The Seattle-based carrier said revenue rose 2.2% to $602 million while passenger traffic fell 1.2%.
The results were in line with analysts’ 61-cent-a-share average earnings estimate, which was lowered from $1.26 after the company last week said it would earn less than expected.
Alaska was hurt by higher fuel costs as well as maintenance expenses as the carrier stepped up inspections and added workers after a January crash off California killed 88 people.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
ENERGY:
* Enron Corp., the world’s largest energy trader, said third-quarter profit rose 31% to $292 million, or 34 cents a share, 2 cents better than forecasts, as its sales of natural gas and electricity surged during a period of higher prices. North American sales of natural gas increased 82%. Enron also sold 46% more electricity in North America as shortages sent prices surging in California and other parts of the U.S. Enron also said it will sell off overseas assets such as power plants and natural gas pipelines that have low rates of return to provide capital for new projects.
* Schlumberger Ltd., the world’s No. 2 oil field services company, said its third-quarter earnings from continuing operations grew 85% to $205 million, or 35 cents a share, a penny better than forecasts, as high oil and natural gas prices fueled a further recovery in its markets. Revenue rose 18% to $2.54 billion.
* Valero Energy Corp., the second-largest independent U.S. oil refiner, said third-quarter profit rose more than fivefold to $127.4 million, or $2.01 a share, from $22.6 million, or 40 cents, a year earlier, as prices for gasoline and heating oil surged. Revenue nearly doubled to $4.25 billion from $2.16 billion. The profit growth far exceeded the $1.64 a share analysts had forecast, and the company said it expects fourth-quarter earnings of more than $1 a share, well beyond the 65 cents now expected by analysts. Sales from the Benicia, Calif., refinery, that Valero acquired from Exxon Mobil Corp. in the second quarter added 90 cents to its earnings in the latest quarter.
MEDIA:
* Knight Ridder Inc. reported third-quarter profit of $76.1 million, barely changed from $76.2 million, a year ago, amid slower advertising demand and rising newsprint prices. Earnings per share at the publisher of the San Jose Mercury News and the Miami Herald rose to 87 cents from 78 cents, reflecting the company’s buyback of 2 million shares during the quarter. Analysts on average had expected earnings of 84 cents. Revenue rose 3.6% to $812.8 million.
* McGraw Hill Cos., a leading textbook publisher and owner of Business Week magazine, said third-quarter earnings rose 14% to $217.7 million, or $1.11 a share, beating forecasts by 2 cents. The company, which also owns the Standard & Poor’s bond-rating agency, said sales rose 5.5% to $1.39 billion.
* McClatchy Co. said third-quarter profit rose 6% to $21.6 million, or 48 cents a share, on strong performance of its newspapers in California--the “Bees” in Sacramento, Fresno and Modesto--and in the Carolinas. The Sacramento-based company’s sales rose 3.7% to $279.2 million. The results matched analyst estimates.
OTHER INDUSTRIES:
* Avis Group Holdings Inc. said third-quarter earnings rose 23% to $48.4 million, or $1.36 a share, beating forecasts of $1.31, as it benefited from a vehicle-leasing business acquired last year. Revenue edged up 0.7% to $1.13 billion.
* Boston Scientific Corp. said third-quarter profit was virtually flat at $105 million, or 26 cents a share, matching estimates. Sales fell 5.6% to $652 million, on greater competition for stents, the tubes that prop open arteries cleared by an angioplasty procedure.
* Caterpillar Inc. said third-quarter profit fell 1.4% to $216 million, or 62 cents a share, because of a decline in the euro and higher costs. The largest maker of construction equipment said sales rose 1.4% to $4.78 billion. The earnings met analyst expectations of 58 cents, which were revised down from 68 cents last month after Caterpillar warned of weaker profit.
* Freddie Mac’s third-quarter profit rose 14% to $645 million, or 86 cents a share, a penny better than expectations, on growth in its mortgage loan portfolio. Revenue grew 12% to $1.12 billion.
* Health Management Associates Inc., which operates rural hospitals in the U.S., said its fiscal fourth-quarter profit rose 20% to $39.1 million, or 16 cents a share, in line with forecasts, as it admitted more patients and performed more surgeries. Revenue rose 14% to $408 million.
* Honeywell International Inc., the biggest maker of automated controls, said third-quarter profit rose 9.5% to $613 million, or 76 cents a share, on higher sales of security systems and factory-automation equipment. Sales rose 3% to $6.22 billion, less than the company expected. Honeywell said sales will continue to be hurt by the drop in the euro and higher raw material costs. However, it expects profit in the fourth quarter and for the full year to be in line with the average forecasts of analysts.
* Bicycle and scooter maker Huffy Corp. reported a profit of $3.7 million, or 36 cents a share, in the third-quarter versus a loss of $10.1 million, or 99 cents, a year ago, as sales from continuing operations grew 62% to $123.9 million. Huffy also said it expects fourth-quarter earnings from continuing operations to exceed previous estimates by 5 to 10 cents a share, resulting in earnings for the full year of $1.10 to $1.15 per share.
* Johnson & Johnson said third-quarter profit increased 14% to $1.26 billion, or 89 cents a share, a penny better than analysts expected, as better operating margins and strong domestic sales of its medicines offset the impact of a weak euro on international sales. Revenue rose 4.6% to $7.20 billion. Sales of pharmaceuticals rose 7.3%, getting a boost from Procrit for anemia and arthritis medication Remicade as well as other drugs. Sales of J&J;’s consumer products, such as its Tylenol painkiller, edged up 1.1% and sales of medical devices grew 4.2%.
* Philip Morris Cos. said profit from operations rose 6.8% to $2.24 billion, or 99 cents a share, from $2.1 billion, or 87 cents, a year earlier, as the company raised prices for its cigarettes and beer and as lower commodity costs fueled gains in its food operations. Sales edged up 0.9% to $20.06 billion. Profit rose 7% at Kraft Foods and 3.6% at the Miller beer unit. Cigarette profit in the U.S. rose 6.1%. Meanwhile, the European Union said it will raise no objections to the company’s proposed $14.9-billion purchase of cookie and cracker maker Nabisco Holdings Corp.
