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EARNINGS ROUNDUP

Boeing Records a Higher-Than-Expected Profit

October 23, 1998| From Times Wire Services

Boeing Co. rebounded to a better-than-expected profit in the third quarter despite lingering production problems, but the jet maker warned that Asia's recession will continue to suppress orders.

Boeing earned $290 million, or 30 cents a share, exceeding the 27-cent average estimate of analysts polled by First Call Corp.

The company lost $696 million, or 72 cents, in the year-earlier third quarter, when it took a $1-billion charge to reimburse customers for delivery delays and pay extra overtime as it sought to double jet production.

Revenue jumped 12% to $12.7 billion, but profit margins were down.

Discounts of as much as one-third on each plane in a price war with rival Airbus Industrie have eroded earnings. Boeing's product line is weighted heavily toward newer models like the year-old 737 "next-generation" and the 3-year-old 777, which have higher development costs. It's also lost a technological edge against Airbus as the European plane maker introduced jets that compete head-to-head with Boeing's.

Boeing's commercial airplane division made only $77 million on sales of $7.7 billion, a profit margin of 1% compared with double-digit margins in 1992, the last peak in the boom-and-bust industry.

Operating profit was down 5.2% in Boeing's space and defense business, largely because of higher research and development costs for its Sea Launch satellite-launching venture and its new tilt-rotor aircraft, the Bell Boeing 609.

Deliveries rose to 123 in the quarter from 89 a year ago, and Boeing said it's confident of delivering about 550 aircraft this year and 620 next year. After that, production is likely to drop "substantially," company executives said.

Alan Mulally, the head of Boeing's civil aircraft unit, said it now expects a "much higher" loss of orders from Asian airlines than the 150 over five years for all plane makers it had earlier estimated.

Boeing had put its own portion of the losses at 90 orders. It will release a revised estimate in the fourth quarter.

"The impact of Asia will really be felt in the year 2000," said Phil Condit, Boeing's chairman and chief executive. "Production will be substantially down in the year 2000."

Separately, Boeing will receive $295 million in settlement of a dispute that started in 1990 between Rockwell International Corp. and the Air Force over payments for work on gunship aircraft, government officials said. Boeing took over the case when it acquired Rockwell's aerospace and defense units in 1996. Rockwell had sought $740 million, but Boeing offered to settle the case for $295 million.

At a Glance

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

BANKS

* Bankers Trust Corp. reported a loss of $488 million, or $4.98 a share, in the third quarter, much higher than a loss of $3.70 a share that analysts expected, as securities trading and investments in Russia and high-yield bonds went awry. The seventh-largest U.S. bank earned $246 million, or $2.19, a year ago. Revenue fell 73% to $471 million. Bankers Trust said it will cut $300 million, or 8% of its expenses, in the next year, mostly through an undisclosed number of job cuts. The emerging markets group lost $309 million, after a gain of $43 million last year. The bank lost $401 million in trading revenue, after a $387-million gain last year. Investment banking lost $142 million, after a gain of $157 million a year ago. The bank said it lost money as credit spreads widened on high yield debt securities and mark to market losses on investments in private equity.

* Bank One Corp., the company created by the merger of First Chicago NBD Corp. and Banc One Corp., said its third-quarter net income as a combined company rose 24% to $1.05 billion, or 89 cents a share, as credit card fees at the country's fifth-largest bank grew. The company also told analysts that the fourth-quarter consensus earnings estimate of 91 cents is as much as 3 cents to 5 cents too high, saying it doesn't fully reflect recent turmoil in the capital markets.

OTHER INDUSTRIES

* Gateway Inc. reported a third-quarter profit of $80.6 million, or 51 cents a share, four cents higher than estimates, as sales jumped 21% to $1.82 billion. In the year-ago quarter, the personal computer maker had a loss of $107.1 million, or 68 cents a share, including a charge of $113.8 million for restructuring, and acquired research and development.

* Deluxe Corp. reported a 5% rise in third-quarter profit to $46.5 million, or 58 cents a share, as sales edged up 0.6% to $469.8 million. The company also said it will cut 3,900 jobs to reduce costs and sell two units to focus on its main businesses of providing paper check and electronic payment services to banks and merchants. Deluxe, which employs about 18,000 people, said 1,700 of the job cuts will come from departures with the sale of its Social Expressions greeting card business and PaperDirect specialty printing unit. Closely held Taylor Corp. is buying the businesses for an undisclosed cash price.

* Kimberly-Clark Corp. said its profit rose 7.6% to $340 million, or 62 cents a share, matching average estimates, on price increases and cost cuts. Sale were flat at $3.1 billion.

* Procter & Gamble Co. profit rose 7.4% to $1.17 billion, or 80 cents a share, three cents above estimates, on price increases for its diapers, paper towels and other products. Revenue rose 1.7% to $9.51 billion.

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