Westinghouse expects 30% drop in earnings

June 29, 1995|By Bloomberg Business News

PITTSBURGH -- Westinghouse Electric Corp. shares fell nearly 8 percent yesterday in the wake of the company's forecast of a 30 percent to 40 percent drop in second-quarter earnings.

Shares of Pittsburgh-based Westinghouse fell $1.25, to $14.50, on trading of 4.61 million shares after it said that it expects second-quarter earnings of 10 cents to 11 cents a share, down from $75 million, or 16 cents, a year ago. The stock was among the most actively traded issues in U.S. markets.

Coupled with disappointing first-quarter earnings, the forecast means that Westinghouse and Chairman and Chief Executive Michael Jordan must deliver strong earnings in the rest of 1995 or risk alienating patient investors, analysts said.

"I think there's a lot of pressure on Jordan," said Ann Schwetje, an analyst at Smith Barney. "But I don't know how much Jordan can control what these markets do."

Westinghouse officials said they expect a $30 million to $50 million shortfall in operating profit in power generation and energy systems, its second- and third-largest businesses.

They cited weak demand for maintenance and repair services in the United States, intense price competition and delays in closing power generation orders overseas.

The company has cut 7,200 jobs in the past 18 months to pare costs, and Mr. Jordan said recently the company might eliminate 1,000 more jobs by 1997.

Westinghouse still believes it can match Wall Street's expectations of 85 cents a share for the year because its other businesses, including Linthicum-based Electronic Systems, its largest unit, and broadcasting are thriving, Mr. Jordan said. Wall Street expected Westinghouse to earn 19 cents a share in the second quarter, based on the average estimate of seven analysts surveyed by Zacks Investment Research.

Yesterday's announcement increased the risk that Westinghouse won't live up to its goals.

TC "Expectations are pretty low," said Kent Newcomb, an analyst at A. G. Edwards. "The sell side of the street is very negative about Westinghouse."

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