United Tech Gains on Revenue

Elena
24 Jan, 2006
New York City

Earnings reports from major companies and oil decline kept stocks in the positive. 3M Co. reported Q4 profit rise, but missed estimates. DuPont beat expectations, despite its Q4 decline. The chemicals company forecast disappointing Q1 earnings. McDonald''''s quarterly profit and J & J''''s income rise met expectations. Lexmark posted 47% profit drop in Q4 but beat estimates. United Tech posted higher Q4 profit on 14% revenue growth.

U.S. MARKET AVERAGES

Retreating oil prices and fourth-quarter earnings reports sent averages above the flat line. Generally, investors reacted positively to the earnings reports, though several major companies announced lackluster results.

Strong quarterly results were released by United Technologies, Brinker International, Arbitron and Coach Inc as each company posted a quarterly growth above estimates. McDonald’s and Johnson & Johnson released net income rise in line with estimates. 3M reported profit rise, but failed to meet expectations, while DuPont posted profit decline above expectations. Lucent Technologies and Agere Systems were among the companies posting a fourth-quarter net income loss.

A number of key tech sectors came off their intraday highs in mid-morning trade. The semiconductor sector posted a modest gain, while the networking and software sectors pushed further into the negative territory. The networking sector stood out as the worst performer in the group, falling by about 1.2%.

Transportation stocks came off intraday highs. The airline sector remained higher by more than 2.1%. HMO, defense and retail stocks were other significant movers to the upside.

Burlington Northern Santa Fe ((BNI))jumped to a new 52-week high on earnings report. Engelhard ((EC)) climbed to a new peak as BASF reaffirmed its plan to acquire the company, despite Engelhard's rejection of the $4.9 billion bid.

Tenet Healthcare ((THC)) fell below a recent trading range to reach a new 52-week low. Tribune ((TRB)) extended recent weakness to drop to a new low.

In midday trading, the Dow Jones industrial average rose 24.41, or 0.23%. The Standard & Poor's 500 index rose 3.32, or 0.26%, and the Nasdaq composite index rose 12.36, or 0.55%.

Bonds fell, with the yield on the 10-year Treasury note rising to 4.38% from 4.36% late Monday.

MOVERS AND SHAKERS

Lexmark International ((LXK)) said Q4 net income declined 47% to $82.3 million, or 71 cents a share, after sales dipped 11.6% to $1.37 billion, leading it to cut 825 positions and send 525 more to low-cost countries. The actions will cost $130 million pre-tax and will lead to annual savings of $80 million, including $50 million in 2006. Analysts were looking for Q4 earnings of 50 cents a share. Lexmark''s board approved an additional $1 billion stock buyback program. The stock rose 8.1%.

United Technologies ((UTX)) reported Q4 earnings of $626 million, or 62 cents a share, up from a year-ago profit of $612 million, or 61 cents a share. Excluding charges the company would have posted earnings of $721 million, or 71 cents a share. Consolidated revenue rose 14% to $11.26 billion from $9.84 billion in the same period a year earlier. Analysts were expecting a profit of 70 cents a share on revenue of $11.1 billion. The company confirmed expectations for earnings of $3.40 to $3.55 a share in fiscal 2006 and said it plans to continue its current share repurchase rate, taking its total to about $1.5 billion for 2006. The stock gained 3.6%.

Ariba Inc. ((ARBA)) reported Q1 net income loss of $3.7 million, or 6 cents a share, compared with a loss of $46.8 million, or 75 cents a share, a year ago. Excluding charges, the company would have reported a profit of $10.2 million, or 14 cents a share. Revenue fell 12% to $76.2 million from $86.9 million. Analysts expected earnings of 7 cents a share on revenue of $76 million. The stock jumped 24.3%.

ArvinMeritor ((ARM)), car parts maker, reported Q1 earnings of $34 million, or 49 cents a share, up from a year-ago profit of $18 million, or 26 cents a share. On a continuing operations basis, excluding items, the company posted earnings of $11 million, or 16 cents a share with sales flat at $2.1 billion compared to last year. For 2006 the company sees earnings from continuing operations of $1.50 to $1.70 a share on sales from continuing operations of about $8.6 billion. For Q2 it forecast earnings before items of 35 to 40 cents a share on sales of $2.2 billion. The company’s shares rose 13.4%.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks recovered from last-week sharp declines, following a securities probe of the Internet portal Livedoor which sent the Nikkei and the other regional bourses in the negative. Investors recharged with positive expectations and charged back into Asian equities. South Korea’s Kospi led the gainers, surging 2.3%, followed by the Nikkei, up 1.9% at 15,648.89. Taiwan’s Weighted index advanced 1.1%, while Shanghai Composite lost 0.3%.

European stocks closed mixed with the German and French indexes supported by strong gains in the auto and chemical sectors, and the U.K.’s index dragged down by Vodafone. The German DAX 30 gained 0.3%, the French CAC 40 advanced 0.3%, while London’s FTSE 100 slipped 0.1%.

OIL, METALS, CURRENCIES

Crude oil prices eased below $68 after Saudi Arabia offered to pump larger amount of crude oil to cover Nigeria’s outage. However, prices were supported by investor fears of potential shortages. Light sweet crude for March delivery fell 69 cents to $67.41 a barrel. London Brent declined 63 cents to $65.53.

European gold traded mixed. In London gold traded at $556.65, up from $555.70. In Zurich the precious metal traded at $556.65, down from $558.25. In Hong Kong gold rose 40 cents to close at $556.40. Silver opened at $8.99, up from $8.92.

The U.S. dollar advanced against other major currencies. The euro was quoted at $1.2272, down from $1.2305. The dollar bought 114.60 yen, up from 114.40. The British pound was quoted at $1.7835, down from $1.7870.

EARNINGS NEWS

Brinker International Inc., ((EAT)), restaurant operator, reported Q2 net income of 49 cents a share, up from 44 cents a share in the year-earlier quarter on 10.9% revenue growth, topping analyst estimate of 46 cents a share. Same-restaurant sales advanced 2.2%.

McDonald''s Corp, ((MCD)), reported Q4 net income of 48 cents a share, up vs. 31 cents a share in the year-ago quarter, matching analysts’ expectations. Revenues increased 4% - 6% in constant currencies - to $5.23 billion, on a 4.2% global comparable sales increase.

Arbitron Inc, ((ARB)), media marketing research company, reported that its Q4 net income advanced to 36 cents a share, up from 31 cents in the year-earlier period, topping analyst estimate for earnings of 31 cents a share. The company announced that revenue for the latest period grew 3.3% to $75.3 million from $72.8 million. Arbitron expects 2006 revenue to increase between 6% and 8% and earnings to come in at $1.65-$1.75, compared with $2.14 in 2005.

Lucent Technologies, ((LU)), telecommunications equipment maker, reported a Q1 loss of 2 cents a share, down vs. earnings of 4 cents a share in the year-ago period. If not for non-recurring items, the company would have earned 4 cents a share, matching analyst estimate. Revenue dropped 12% to $2.05 billion from last year''s $2.34 billion.

Agere Systems, ((AGR)), technology company, reported a Q1 loss of 11 cents a share, up from the year-ago loss of 39 cents a share. The company reported pro forma net income of or 9 cents a share, compared to a net loss of 5 cents a share in the year-earlier period, topping on that basis analysts’ forecasts of earnings of 8 cents a share. Revenue dropped to $403 million from $410 million. The company expects Q2 earnings of 5-11 cents a share on a pro forma basis compared to analysts’ expectations of 10 cents a share.

3M Co, ((MMM)), diversified manufacturer, reported net income of 99 cents a share, up from 91 cents a share in the same period a year ago, missing analyst estimate of $1.03 a share. Sales rose 4.5% in the latest quarter. If not for accounting charges, 3M would have made $1.04 a share in the quarter. The company announced its 2006 earnings would be $1.10 to $1.14 in Q1 of 2006, including a 2-cent a share charge accounting changes. Earnings in 2006 would be $4.45 to $4.60 a share, including 16 cents a share for stock options expensing.

DuPont, ((DD)), chemical and biotechnology products company, reported Q4 earnings of 16 cents a share, down from a year-earlier profit of 28 cents a share, beating, though, analyst estimate of 10 cents a share. Q4 results incorporate a gain of 3 cents a share related to lower than expected tax costs from its repatriation of foreign earnings. Sales fell 3% in Q4 to $5.83 billion from $6 billion in the same period the previous year. DuPont forecast earnings of 70 cents a share for the first quarter, falling short of analyst estimate for a profit of 99 cents a share. The company expects Q1 results to be hurt by a year-over-year decline in its agriculture and nutrition business due to lower volumes from crop protection chemicals, competitive pressures, and a shift in seasonal revenue. The company also anticipates its performance materials and coatings and color technologies businesses to continue to be adversely affected by Hurricanes Katrina and Rita. For 2006, the company expects earnings to be about $2.60 a share.

Northrop Grumman Corp, ((NOC)), defense contracting company, reported Q4 net income of 92 cents a share, up from 74 cents a share in the same period a year earlier, beating the analysts’ estimate of 83 cents a share. Revenue was estimated to be about flat at $7.85 billion. The company lifted its 2006 earnings estimate to $4.25-$4.40 a share, but lowered its sales estimate to about $31 billion.

Johnson & Johnson, ((JNJ)), consumer and healthcare company, reported Q4 earnings of 73 cents a share, up from 41 cents a share in the year-ago period, in line with analyst estimate. The year-earlier quarter included a $789 million tax charge connected with the repatriation of funds. Sales fell 1.1%, as domestic sales dropped 4.2%, while international sales increased 3.1%.

Texas Instruments, ((TXN)), maker of chips for mobile phones, reported earnings of 40 cents per share, up from 28 cents per share in the year-ago period. The results included 3 cents per share for stock-based compensation, typically excluded by analysts from their estimates. Analysts were expecting the company to earn 42 cents per share in the latest quarter. Revenue rose to $3.59 billion from $3.15 billion a year ago. Texas Instruments announced a 34 % increase in quarterly income on strong sales of chips for mobile phones and electronic devices

American Express Co., ((AXP)), credit-card issuer, reported Q4 net profit of 59 cents a share, down 17 % from 71 cents a share in the year-ago period on consumer and corporate cardholder spending as well as double-digit growth in the transaction fees its charges merchants. The drop in net income was a function of the spin-off of American Express'' investment advisory unit late last year and masked what was actually a solid performance. Revenue grew 9 % to $6.4 billion, with the increase driven by a 13 % rise in merchant fees, known as discount revenue, and a 15 % increase in cardholder spending. Billed business growth was especially strong in Canada and Latin America.

AirTran Holdings Inc, ((AAI)), discount airline operator, reported a Q4 net loss of $0.4 million, down from a net profit of $1.1 million in the year-ago period, despite 46.1% revenue growth. The company said capacity in the quarter grew 25% and traffic rose 28.9%, but costs also rose substantially, including an almost doubling of fuel costs compared to last year.

ExpressJet Holdings Inc., ((XJT)), carrier, reported Q4 net income of 42 cents a share, down from 56 cents, in the comparable period the previous year. The company’s quarterly revenue increased 4.6%. ExpressJet''s operating margin narrowed to 9.8% from the prior year''s 14.2%. Revenue passenger miles advanced 20% as Q4 load factor reached 76.1% from 72.6%. Analysts had been looking for the company to earn 44 cents a share.

Coach Inc., ((COH)), handbag and leather goods maker, posted Q2 income of 45 cents a share, up from 32 cents a share in the year-earlier period. Excluding an option expense, the company earned 47 cents a share in Q2, compared to 34 cents a share in the year ago quarter. Analysts were waiting for it to earn 44 cents a share. Net sales advanced to $650.3 million, from $531.8 million last year.

CORPORATE NEWS

Automaker DaimlerChrysler announced that it would reduce administrative staff by 20% over three years, cutting 6,000 jobs and saving $1.2 billion a year in a bid to make the company more competitive and profitable. The cuts would affect areas as accounting, auditing, personnel and strategic planning.