Westinghouse says earnings to be much lower than expected Stock slides

more layoffs possible

September 18, 1993|By Ted Shelsby | Ted Shelsby,Staff Writer

Westinghouse Electric Corp. surprised Wall Street yesterday and sent its stock sliding as it announced that third-quarter earnings would be sharply lower than expected. The company indicated that more layoffs could also be coming.

Michael H. Jordan, who took over as chairman and chief executive earlier this year, said in a brief statement that earnings from continuing operations "are likely to be down approximately 50 percent from last year's [restated] third quarter of 22 cents a share."

Looking further ahead, Mr. Jordan continued the disappointing news, saying that despite expectations of a strong fourth quarter, operating results for the full year would be below previous expectations. He predicted earnings would decline between 10 percent and 20 percent for the full year.

Westinghouse stock fell slightly more than 8 percent in heavy trading to close at $13.75, down $1.125 a share.

Investors were not the only ones concerned over the plight of Westinghouse. The company also opened the door to the possibility of a new round of layoffs.

Jay McCaffrey, a company spokesman, said transition teams were looking at all operations of the corporation and that they could suggest more cuts when their work was completed later this year.

Westinghouse has already reduced its worldwide employment by 13,000, or about 20 percent, over the past four years, including more than 4,000 layoffs in Maryland. The company employs about 12,500 workers in the state.

"Surprised. That's putting it mildly," said Kent A. Newcomb, an analyst with A.G. Edwards & Sons in St. Louis, of Westinghouse's announcement. Mr. Newcomb said Mr. Jordan's earnings projection "was well below everybody's expectations."

"We were expecting a flat quarter," he said, "but something in the range of 22 to 23 cents a share."

The company earned $197 million, or 22 cents a share, in the year-ago quarter. A company spokesman said earnings were restated to reflect a decision to return two units to continuing operations.

Mr. Newcomb, like other analysts who follow Westinghouse, said he was being bombarded with calls from nervous investors.

Albert E. Turner, who follows Westinghouse for Duff & Phelps Inc. in Chicago, said he was disappointed with yesterday's announcement and warned that investors could expect the pattern to continue for the next couple of quarters.

But Westinghouse said the fourth quarter would be the strongest quarter of the year, thanks primarily to expected improvements in shipments in its Power Systems unit and Electronic Systems Group, which is based in Linthicum.

As an indication that Westinghouse's problems were broader than earlier believed, the company said that the rough times have nothing to do with the Pittsburgh-based company's financial services unit, which has been the source of most of its losses in recent years.

Westinghouse blamed its $1.3 billion loss last year primarily on its decision to write off troubled assets in its financial services unit, leading to a $1.28 billion charge against fourth-quarter earnings.

"Financial Services was not the major trouble spot this time," Mr. McCaffrey said, adding that the current problems were related to the company's core businesses.

In its statement, Westinghouse said the poor third quarter was partly because of continued deterioration in the environmental market. It added that near-term improvement was not likely.

The company said three of its four other operating units, including its Electronic Systems Group and its Power Systems and Broadcasting divisions, were expected to post lower operating results compared with last year's third quarter, which ended Sept. 30.

Mr. McCaffrey explained that the environment division, which is involved in the cleanup of toxic and nuclear waste throughout the world, has been plagued by a lower volume of business from both government and corporate customers.

In addition, he said, the division was feeling the impact of significant price pressure from increased competition for a smaller amount of business.

As for its Maryland operation, Mr. McCaffrey, said sales and operating earnings of its Electronic Systems division would be lower "across the board."

He explained that Department of Defense business, as well as its foreign military and commercial business would be lower in the third quarter when compared with the same period last year.

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