McDonald’s Reports Rare Profit Drop

Europeans’ wariness of beef during a “mad cow” disease scare combined with a weak euro to send McDonald’s Corp.’s quarterly profit lower for the first time in years.

The world’s largest fast-food company said fourth-quarter earnings fell to $452 million, or 34 cents a share, from $486.2 million, or 35 cents a share, a year earlier, on a 6.4% rise in revenue to $3.59 billion.

Chief Executive Jack Greenberg also warned of a “very challenging” first quarter because of the beef fears in Europe, where the company has nearly 5,500 stores, as well as tough sales comparisons from last year.

McDonald’s was expected to earn 35 cents a share in the fourth quarter, the revised average estimate of analysts polled by First Call/Thomson Financial. The estimate has been cut by 6 cents since the beginning of 2000.

The company hasn’t had a quarterly earnings decline since at least 1990, said Joe Cooper, an analyst with First Call.

McDonald’s has seen sales erode in Europe since November amid an outbreak of mad cow disease, a chronic degenerative disease affecting the central nervous system of cattle. More than 80 people in Europe have died of the human form of the brain-wasting affliction.

The company has stepped up promotions of non-beef products.

Profit fell 17% in the European operations, which accounts for about 25% of McDonald’s business, and was off 3% even when taking into account the stronger dollar. Sales fell 9% in the region but would have been up 5% without the effect of the strong dollar, the company said.

In the U.S., sales rose 3% to $4.82 billion while operating income grew 14% to $385.3 million.

McDonald’s said it plans to add about 1,700 restaurants worldwide in 2001, down from 2,398 last year when it acquired the Boston Market chain. About 100 to 150 of the stores will come from non-McDonald’s concepts, including its recently acquired Chipotle Mexican and Donatos pizza chains.

Shares of Oak Brook, Ill.-based McDonald’s fell $2.06 to close at $30.81 on the New York Stock Exchange.

At a Glance

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

TECHNOLOGY:

* Corning Inc. said profit soared 121% to $314.6 million, or 34 cents a share, in the fourth quarter on robust demand for fiber-optic materials, but it cautioned that sales might ease in the first quarter because of softening in the telecommunications market. Corning’s latest earnings far exceeded analyst expectations of 28 cents, as revenue jumped 52% to $2.1 billion. Separately, the company said it will build a plant in Fountain Valley to meet demand for wavelength-management products. The plant, expected to employ more than 200 people, is expected to be completed by the third quarter.

* Qwest Communications International Inc. said fourth-quarter profit rose 44% to $270 million, or 16 cents a share, as the long-distance company’s customers ordered more Internet and data-transmission services. Sales rose 9.9% to $5.02 billion.

* VeriSign Inc.’s earnings rose 18% to $45.5 million, or 21 cents a share, in its fiscal third quarter, smashing analyst forecasts of 11 cents, as revenue from sales of Internet domain names and security products rose 14% to $197 million.

PHARMACEUTICALS:

* Bristol-Myers Squibb Co.’s fourth-quarter profit rose 11% to $1.16 billion, or 59 cents a share, a penny better than forecasts, as lower costs and higher demand for hypertension and diabetes drugs helped make up for slowing sales growth. Revenue rose 1.7% to $5.5 billion.

* Pfizer Inc., the world’s No. 1 drug maker, said fourth-quarter profit rose 20% to $1.76 billion, or 27 cents a share, in line with expectations, as sales grew 7.6% to $8.11 billion. Sales of its biggest product, Lipitor, rose 26% to $1.43 billion.

OTHER INDUSTRIES:

* DuPont Co.’s earnings fell 15% in the fourth quarter to $494 million, or 47 cents a share, because of surging energy costs and slowing sales. The chemical company’s revenue dropped 19% to $6.26 billion. Analysts were expecting earnings of 46 cents.

* General Dynamics said profit grew 11% in the fourth quarter to $219 million, or $1.09 a share, two cents better than analysts anticipated, led by strong aircraft orders in its aerospace division. Profit grew at three of the company’s main units--aerospace, information systems and technology and marine systems. Earnings were off 6% in the combat systems division.

* Raytheon said fourth-quarter profit from continuing operations more than doubled to $190 million, or 55 cents a share, matching forecasts, led by sales at its electronics and aircraft units and by cost cutting. Revenue was up 4.8% to $4.4 billion.

* TRW Inc. said fourth-quarter earnings fell 63% to $60.9 million, or 50 cents a share, meeting analyst forecasts, as sales declined 11% to $4.1 billion. The company’s automotive division was hit especially hard, with profit down 56% and sales off 18%, as auto makers cut back production. The unit’s earnings also were lowered by the strong dollar, the sale of several businesses and previously announced recalls. In the aerospace and information systems division, sales rose 6.6% to $1.6 billion but profit declined 19% to $128.1 million. TRW blamed a change in the mix of programs, increased investments and the stronger dollar.

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Earnings Reports

A sampling of companies reporting quarterly earnings Wednesday, ranked by year-over-year earnings-per-share (EPS) growth, compiled by First Call/Thomson Financial.

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Analysts’ % above/ Year- Year- Ticker est. Actual below ago over-year Company symbol EPS EPS estimate qtr. % change Progressive PGR $0.48 $0.67 +40% $0.06 +1,017% Varian Med. Systems VAR 0.21 0.28 +33 0.17 +65 DTE Energy DTE 0.95 0.97 +2 0.67 +45 Norfolk Southern NSC 0.07 0.11 +57 0.08 +38 Maxtor MXTR 0.00 0.04 NM 0.03 +33 CMS Energy CMS 0.59 0.78 +32 0.63 +24 Danaher DHR 0.59 0.60 +2 0.51 +18 Weyerhaeuser WY 0.78 0.88 +13 0.81 +9 Ingersoll- Rand IR 0.94 1.00 +6 1.01 --1 Alcan Aluminum AL 0.42 0.54 +29 0.69 --22 T. Rowe Price TROW 0.50 0.43 --14 0.55 --22 Int’l. Paper IP 0.30 0.28 --7 0.55 --49 Exodus Comm. EXDS --0.16 --0.13 NM -0.13 NM USX-U.S. Steel X --0.21 --0.67 NM 0.42 NM Read-Rite RDRT 0.03 0.13 NM -1.15 NM

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Notes: NM = not meaningful. A loss in any period makes percentage change not calculable.

Year-over-year growth and percentage changes are based on earnings-per-share figures and may differ from percentage changes based on total profit.

For more information on First Call, check www.firstcall.com.