Amazon profit up, margins squeezed Amazon.com on Wednesday issued quarterly earnings and full-year sales forecasts ahead of Wall Street targets, but profit margins declined in what one analyst called a disappointment.
Shares of the Internet retailer, which trade at a huge premium to peers, fell about 3.5 percent to $71.61 in after-hours trade.
Hamed Khorsand of BWS Financial noted that gross profit margins were down from a year ago and the previous quarter.
"That was disappointing," he said. "It seems there was a lot of promotions, discounting in the quarter." The operating income outlook "doesn't look too great," he added.
The fourth-quarter gross margin of 20.6 percent was below 21.3 percent a year earlier and 23.4 percent in the third quarter.
Net profit rose 112 percent to $207 million, or 48 cents per share, from $98 million, or 23 cents per share, a year ago. Sales rose 42 percent to $5.67 billion in the quarter.
Analysts, on average, had been expecting Seattle-based Amazon to post earnings of 47 cents per share on revenue of $5.36 billion, according to Reuters Estimates.
Operating income rose 38 percent to $271 million.
Amazon had been expecting quarterly net sales to range between $5.1 billion to $5.45 billion with operating income of $221 million to $291 million.
Amazon was one of the high-flying tech stocks in the latter half of 2007, but much of that gain was lost in a recent sector selloff on recession fears and disappointing forecasts from Apple, eBay, and Yahoo. Wall Street concerns center on how Amazon, the most popular Web e-commerce site behind eBay, will fare in a recession.
1/30/2008 12:38:35 PM Tobacco products maker Altria Group, Inc. (MO) said on Wednesday that fourth quarter profit dropped over 9%, despite revenues that rose more than 13%. The company also revealed the spin-off of its overseas unit Philip Morris International Inc. or PMI and identified the new Altria and PMI Boards of Directors. Altria also announced dividend policies, initial dividend rates and share repurchase programs for both companies, and provided 2008 earnings per share from continuing operations forecasts for Altria and PMI.
The New York-based company reported fourth quarter net earnings of $2.188 billion or $1.03 per share, a decline from $2.959 million or $1.40 per share in the same period last year.
Earnings from continuing operations, including gain on sales of busineses, asset impairment, exit and implementation costs and tax items, slipped 9.1% to $2.188 billion or $1.03 per share in the latest period from $2.406 billion or $1.14 per share reported last year.
Adjusted for items, earnings per share were up 5.3% to $1.00 from $0.95 in the year-earlier period, which included a $488 million gain from PMI's reorganization of its tobacco and beer equity holdings in the Dominican Republic. On average, 8 analysts polled by First Call/Thomson Financial expected earnings of $0.97 per share.
Gross profit advanced to $5.205 billion from $4.778 billion. Net revenues for the quarter increased 13.7% to $18.229 billion from $16.027 billion.
US Tobacco revenues were $4.487 billion, down 1.1% from last year, while revenue from European Union climbed 16.8% to $6.429 billion. Eastern Europe, Middle East & Africa or EEMA revenues jumped 30.5% to $2.944 billion and revenue generated from Asia increased 11% to $2.748 billion.
The world's largest tobacco company said operating income for the period slipped to $3.036 billion from $3.244 billion. In the fourth quarter, U.S. tobacco operating companies income decreased 3.2% to $1.1 billion from last year. For PMI, operating companies income decreased 10.0% to $2.0 billion, due primarily to the impact of the Dominican Republic transaction in the fourth quarter of 2006 as well as unfavorable mix.
For European Union, operating companies income grew 17.4% to $917 million, driven by higher pricing and favorable currency of $123 million. EEMA operating companies income increased 21.1% to $516 million, due mainly to higher pricing, lower costs and favorable currency of $25 million.
Cash and cash equivalents at the end of December 31, 2007 was $6.498 billion, while they were $4.781 billion at the end of December 31, 2006. Total debt for both the periods was $11.046 billion and $8.485 billion, respectively.
For the third quarter, the cigarette maker's profit dropped 8.4%, hurt by the spin-off of food maker Kraft Foods Inc. (KFT). The company posted third quarter net income of $2.63 billion, down 8.4% from previous year's income of $2.88 billion. Earnings per share slipped 8.8% to $1.24 per share from $1.36 per share in the same quarter last year. Quarterly net revenues realized by the company improved 8.9% to $19.2 billion from $17.6 billion in the equivalent quarter of the previous year.
Full year net earnings declined to $9.786 billion or $4.62 per share from $12.022 billion or $5.71 per share in 2006. Earnings from continuing operations in 2007 reduced to $9.161 billion or $4.33 per share from $9.329 billion or $4.43 per share.
Adjusted for items, earnings per share were up 8.1% to $4.38 from $4.05 in 2006. Revenues for the year rose over 10% to $73.801 billion from $67.051 billion. For the full year, analysts expected earnings of $4.37 per share on revenues of $37.95 billion.
Outlook
Looking ahead, Altria forecasts 2008 adjusted full-year earnings per share from continuing operations in the range $1.63-$1.67. Earnings per share growth is expected to be stronger in the second half of 2008. PMI sees adjusted earnings per share from continuing operations at current exchange rates in a range of $3.11-$3.17 for 2008, reflecting a growth rate of approximately 12% to 14% from the pro-forma adjusted base of $2.78 per share in 2007.
For 2008, analysts expect earnings of $4.74 per share for the combined company.
PMI spin off
Altria said its board of directors on Wednesday voted to authorize the spin-off of 100% of the shares of PMI to Altria's shareholders. On August 29, the Board announced its intention to pursue the spin-off and said it would be in a position to finalize its decision and announce the precise timing of the spin-off at its regularly scheduled meeting on January 30, 2008.
The distribution will be made on March 28 to Altria shareholders of record as on March 19. Altria will distribute one share of PMI for every share of Altria common stock outstanding as of the record date.
After the spin off, Altria's Board of Directors will include four continuing members from the current Board - Elizabeth Bailey, Robert Huntley, Thomas Jones and George Muñoz - who will be joined by four new directors - Thomas Farrell II, Gerald Baliles, Dinyar Devitre, Michael Szymanczyk. Szymanczyk will serve as Chairman of the Board and Chief Executive Officer of Altria.
PMI's Board of Directors post-spin will include five members who will step down from the current Altria Board of Directors and two others. Graham Mackay, Chief Executive Officer of SABMiller, has agreed to join the PMI Board later in 2008. Louis Camilleri will serve as Chairman of the Board and Chief Executive Officer of PMI following his resignation from those posts at Altria.
The company also said John Reed, one of the longest-serving members, has elected to retire from the Altria Board of Directors. As a result of the PMI spin-off, the date for the annual meeting of shareholders for Altria has been moved to May 28, 2008 in Richmond, Virginia.
Cigarette makers are having a tough time, with consumption falling in the U.S. and a ban on public smoking in place in western Europe. It is viewed that the Marlboro maker will have to concentrate on emerging markets, in addition to tapping the potential already available in Russia and Turkey. PMI controls two-thirds of the company's profit.
According to Louis Camilleri, Chairman and Chief Executive Officer of Altria, “The PMI spin-off and related actions position our international and domestic tobacco businesses for future success as stand-alone companies with unique and formidable strengths, including leading brands, strong cash flow, experienced leadership and solid growth prospects.”
b>Dividends
Altria board also reaffirmed its intention to adjust Altria's dividend immediately following the distribution of PMI shares. This will enable Altria shareholders who retain their PMI shares to receive, in the aggregate, the same annual cash dividend rate of $3.00 per share that existed before the spin-off.
Altria is expected to pay a dividend at the initial rate of $0.29 per share per quarter, or $1.16 per common share on an annualized basis. The company has established a dividend policy that anticipates a payout ratio of nearly 75% after the spin-off.
PMI is expected to pay a dividend at the initial rate of $0.46 per share per quarter, or $1.84 per common share on an annualized basis. PMI has established a dividend policy that estimates a payout ratio of about 65% post-spin.
Share re-purchase
A new $7.5 billion two-year share repurchase program was authorized for Altria. It is expected to begin in April, after completion of the spin-off.
For PMI, a $13.0 billion two-year share repurchase program was authorized, which is anticipated to begin in early May.
Altria also said it has arranged a $4.0 billion, 364-day credit facility. Following the spin-off, Altria intends to access the public debt market to refinance debt incurred in connection with the tender offer.
Among other things, Altria noted that in establishing the initial capitalization of the two companies, PMI would pay Altria $4.0 billion in dividends. Out of these $3.1 billion was paid at the end of 2007. Altria and PMI will reimburse each other for the fair value of stock awards held by their respective employees. Based on the number of stock awards outstanding as of December 31, 2007 the net payment from Altria to PMI would be $427 million.
Merck posts $1.6 billion Q4 loss Vioxx charge leads to huge Q4 Merck loss Merck & Co. posted a $1.63 billion fourth-quarter loss Wednesday as a whopping charge for its Vioxx litigation settlement dragged down results.
The maker of allergy and asthma pill Singulair and osteoporosis treatment Fosamax said the net loss amounted to 75 cents per share, compared with a year-ago profit of 22 cents, or $473.9 million.
Merck's fourth-quarter revenues were below analysts' expectations and the drug maker's shares closed Wedneday down $1.32, or 2.75 percent, to $46.69.
The fourth-quarter results included charges totaling $5.8 billion. Those were partly offset by a $1.9 billion reduction in taxes and a $455 million gain from insurance arbitration over coverage for Vioxx litigation.
The charges included $4.85 billion for Merck's pending settlement to end the bulk of lawsuits over Vioxx, the painkiller it pulled from the market in September 2004 due to increased risk of heart attack and stroke.
Merck said as of Jan. 17, more than 57,000 plaintiffs — out of about 60,500 — had registered for, but not yet committed to, the settlement.
Other charges included $274 million for ongoing restructuring and $671 million for the anticipated resolution of federal and state civil probes into past marketing practices.
Excluding the one-time charges, net income would have been 80 cents per share, 6 cents more than forecast by analysts surveyed by Thomson Financial.
But analysts had forecast revenues of $6.3 billion. Merck delivered only $6.24 billion, with revenues up 3 percent from $6.04 billion a year ago.
"The upside was primarily driven by lower costs and a lower tax rate," analyst James Kelly of Goldman Sachs & Co. wrote in a research report.
Merck said sales of cholesterol drugs Vytorin and Zetia, sold under a joint venture with Schering-Plough Corp., totaled $1.5 billion in the fourth quarter, up 34 percent from a year earlier, and $5.2 billion in 2007. Merck recorded $538 million as fourth-quarter equity income.
Merck said it is monitoring the "potential financial impact" of recent publicity about a study showing Vytorin was no more effective at limiting plaque buildup than one of its components, Zocor, now available as an inexpensive generic drug, although Vytorin did lower bad cholesterol levels a bit more.
The Whitehouse Station-based company said it knows of about 50 potential class action suits alleging consumer fraud in the marketing of Vytorin and Zetia.
Since Merck and Schering-Plough Corp. disclosed partial results of the Vytorin study on Jan. 14, sales reps have visited about 95 percent of top specialists and 90 percent of primary care doctors to discuss Vytorin and Zetia, Chief Executive Officer Richard Clark told analysts during a conference call. He said the company has not yet decided whether it will resume TV ads for the two drugs.
"These guys are going to defend Vytorin just as hard as they defended Vioxx," predicted analyst Steve Brozak of WBB Securities.
Chief Financial Officer Peter Kellogg noted patent expirations in 2006 — for former blockbuster Zocor and enlarged prostate gland treatment Proscar — cut revenues by $2 billion last year.
"Despite having that, we still delivered 10 percent revenue growth" in 2007, counting the joint venture income, he said in an interview.
However, revenue growth in the fourth quarter all came from favorable currency exchange rates and price hikes. Brozak said there wasn't the predictable growth in U.S. sales, so first-quarter revenues should be closely watched.
Merck reiterated it expects full-year 2008 earnings per share of $3.28 to $3.38, excluding one-time items. Those items include an expected gain of about $2.2 billion as AstraZeneca PLC begins to buy out Merck's share in their long-running joint venture.
For the full year, net income totaled $3.28 billion, or $1.49 per share, down 26 percent from $4.43 billion, or $2.03 per share, in 2006. Revenues totaled $24.2 billion, up 7 percent from $22.6 billion in 2006. http://www.chron.com/disp/story.mpl/ap/business/5499531.html
Pulte Homes 4Q Loss Widens On Land Charges Pulte Homes Inc.'s (PHM) fourth-quarter net loss widened as the company took more charges to reflect the decreased value of unsold homes and reduce its land inventory in a slumping housing market.
Shares rose 1% after hours as the company also projected a loss in the first quarter of 2008 but a smaller one than Wall Street is expecting.
The Bloomfield Hills, Mich., home builder reported a net loss of $874.7 million, or $3.46 a share, compared with a net loss of $8.4 million, or 3 cents a share, a year earlier.
The latest results included $1.28 a share in inventory impairments, other land-related charges and impairments of goodwill. Pulte also recorded an after- tax, noncash deferred-tax valuation allowance of $2.46 a share.
Year-earlier results included 64 cents a share in land and goodwill charges.
Pulte said its loss from continuing operations was $3.54 a share, compared with a loss of 3 cents a share a year earlier.
In November, Pulte reaffirmed its guidance that it would turn a fourth-quarter profit excluding charges.
Revenue dropped 34% to $2.9 billion.
Analysts' mean estimates were for a loss of 50 cents a share on revenue of $ 2.73 billion, according to a poll by Thomson Financial.
Chief Executive Richard J. Dugas Jr. said, "The challenging market conditions that plagued the homebuilding industry for the first nine months of 2007 worsened in the fourth quarter. Levels of new and existing home inventory remain elevated, buyer demand for new homes continues to be weak, and mortgage availability is still a problem for many prospective homebuyers."
Net new home orders fell 29% to 4,562 homes, valued at $1.2 billion. Closings dropped 31% to 8,714 as the average sales price declined 6% to $319,000.
The company's backlog as of Dec. 31 was valued at $2.5 billion, or 7,890 homes, compared with $3.6 billion, or 10,255 homes a year earlier.
Unlike other home builders, Pulte, which builds active-adult communities as well as traditional homes, has not cut prices or offered incentives to buyers except in "limited cases."
In May, Pulte cut about 16% of its work force, or about 2,000 jobs, in a restructuring aimed at saving $200 million a year before taxes.
Looking ahead, Pulte predicted a net loss from continuing operations of 15 cents to 30 cents a share, excluding items. "This projection reflects the ongoing tough operating environment for homebuilding," Dugas said.
Analysts' mean estimates were for a first-quarter loss of 41 cents a share on revenue of $1.42 billion.
Starbucks cautious on 2008, cuts store openings Starbucks Corp (SBUX.O: Quote, Profile, Research) on Wednesday said it is slowing store openings in the U.S. as returning Chief Executive Howard Schultz warned that the American consumer is likely facing a recession, and its shares fell 2.5 percent.
The coffee chain has been battered in recent months by slower consumer spending, higher milk prices and concerns it may have saturated the U.S. market.
"There's a macroeconomic headwind that we're all facing that strongly suggests that the consumer is in a recession," Schultz said in a telephone interview.
Starbucks cut its forecast for new U.S. store openings to 1,175 for fiscal 2008, from 1,600. This would include the closing of 100 underperforming stores in the U.S. Meanwhile, it plans to increase international store openings by 75 outlets to 975.
The coffee seller said it now expects earnings per share in fiscal 2008 to grow in the low double-digits by percentage. Starbucks' previous forecast was for earnings per share of between $1.02 and $1.05 in fiscal 2008, which would mark a 17 to 21 percent increase in earnings per share.
"The guidance looks conservative. That doesn't run counter to expectations. The expectation was that the guidance would come down a bit," said Dan Geiman, analyst at McAdams Wright Ragen.
Starbucks had fiscal first-quarter net income of $208.1 million, or 28 cents per share, compared with net income of $205.0 million, or 26 cents per share, in the year-ago quarter ended December. Consolidated net revenue rose 17 percent to $2.8 billion.
The result topped analysts' average call for a net profit of 27 cents per share and revenue of $2.76 billion, according to Reuters Estimates. It landed as Seattle-based Starbucks faces new competition from fast-food giant McDonald's Corp (MCD.N: Quote, Profile, Research), which is expanding its selection of coffee-based drinks. http://www.reuters.com/article/pressReleasesMolt/idUSWNAS851720080130
Boeing posts record earnings in 2007 The Boeing Co. set a company record in 2007 posting $4.1 billion in profit with $3.4 billion of those earnings coming from its St. Louis-based Integrated Defense Systems (IDS) unit, Boeing reported Wednesday.
Boeing attributed its 84 percent increase in profit during 2007 to higher commercial airplane deliveries, strong growth in defense earnings and companywide productivity improvements. For the year ended Dec. 31, Boeing's profit went from $2.2 billion, or $2.85 per share, in 2006 to $4.1 billion, or $5.28 per share.
Despite its earnings falling by 5 percent during the fourth quarter to $978 million, Boeing's IDS unit posted a 13 percent increase in profit for the entire year jumping from $3.03 billion in 2006 to $3.44 billion in 2007.
For the fourth quarter ended Dec. 31, Boeing's profit increased 4 percent from $989 million, or $1.29 per share, during the prior year to $1.03 billion, or $1.36 per share, in 2007.
Boeing reported $66.4 billion in revenue during 2007, an 8 percent increase from sales of $61.5 billion in 2006. Sales for the fourth quarter remained unchanged from sales of $17.5 billion during the fourth quarter of 2006.
IDS was able to post a 13 percent increase in profit for the year despite its sales dropping slightly from $32.4 billion to $32.1 billion. For the fourth quarter, sales dropped 14 percent from $9.7 billion to $8.4 billion.
During 2007, IDS won nine out of 11 significant competitions, according to Boeing. Its backlog at the end of the fourth quarter grew to $71.7 billion reflecting new orders that exceeded current-period revenues.
A unit of Chicago-based Boeing Co. (NYSE: BA), Integrated Defense Systems is one of the world's largest space and defense businesses specializing in innovative and capabilities-driven customer solutions. Headquartered in St. Louis, Integrated Defense Systems is a $32.1 billion business with 72,000 employees worldwide. http://washington.bizjournals.com/stlouis/stories/2008/01/28/daily36.html
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