Caterpillar earnings off 26%

forecast is cut

Profit up at Merrill Lynch, Johnson & Johnson, Whirlpool and Harley

July 17, 2002

Caterpillar Inc. said second-quarter net income fell 26 percent, far below estimates, and reduced its full-year profit forecast because of slow sales of mining and power-generation equipment.

Net income at the No. 1 maker of earthmoving equipment fell to $200 million, or 58 cents a share, from $271 million, or 78 cents, in the year-earlier quarter. Sales fell 3.6 percent to $5.29 billion, the Peoria, Ill.-based company said.

Caterpillar, which also makes truck engines and turbines, was expected to earn 73 cents, the average estimate of analysts surveyed by Thomson/First Call.

Customers are renting equipment instead of buying because they aren't confident about the economy and financing isn't readily available, Caterpillar said. Competitors from Japan and South Korea are also vying for the limited U.S. demand, analysts said.

Sales were $5.49 billion in the 2001 quarter.

Merrill Lynch & Co.

Profit rose for the first time in six quarters as the biggest securities company in terms of capital pared costs to offset declining revenue amid a slump in stock sales and mergers.

Merrill Lynch earned $634 million, or 66 cents a share, in the second quarter, up 17 percent from $541 million, or 56 cents a share, a year earlier. The results in this year's quarter include $111 million the company set aside to settle charges that its analysts misled investors to win and retain investment-banking assignments.

The expense reductions engineered by President Stanley O'Neal, who cut 1,800 jobs in the quarter, helped the company increase profit margins in its investment banking, brokerage and asset-management divisions.

Merrill's second-quarter revenue fell 11 percent to $4.9 billion. Expenses dropped 15 percent to $4 billion. At the end of the second quarter, Merrill had 54,600 employees, 1,800 fewer than in first quarter and 2,800 fewer than at the beginning of the year. The company eliminated about 15,000 jobs last year.

Johnson & Johnson

The health care giant reported that second-quarter net income increased 11.6 percent as sales of prescription drugs, medical devices and diagnostic equipment posted double-digit increases.

The company said its net income climbed to $1.65 billion, or 54 cents a share, from $1.48 billion, or 48 cents a share, a year earlier.

Excluding special charges, net income was $1.84 billion, or 60 cents a share. Analysts had forecast earnings of 58 cents a share.

Sales in the quarter rose 10.9 percent, to $9.1 billion from $8.18 billion a year earlier.

Whirlpool Corp.

The largest U.S. appliance maker said second-quarter profit rose 19 percent as it trimmed costs and increased sales of higher-priced washers and dryers.

Net income at the maker of Whirlpool, Kenmore and Kitchen Aid appliances rose to $63 million, or 91 cents a share, from $53 million, or 78 cents, a year earlier. Sales rose 5.9 percent to $2.7 billion.

Appliance makers have benefited from low interest rates, which have encouraged consumers to refinance mortgages and remodel homes with more expensive appliances, analysts said.

Sales in the second half of the year will increase at a slower pace than in first half, the company said during a conference call. Excluding costs for eliminating jobs and closing plants, Whirlpool continues to expect its profit to increase by 10 percent this year.

Harley-Davidson Inc.

The world's largest maker of heavyweight motorcycles said its second-quarter profit jumped 25 percent on increased demand.

Net income for the maker of Fat Boy and Road King cruisers climbed to $144.3 million, or 47 cents a share, from $115.6 million, or 38 cents, a year earlier, the Milwaukee-based company said. Sales rose 16 percent to $1 billion from $850.9 million.

The earnings exceeded analysts' average estimate of 44 cents a share. Harley's per-share profit has risen for 32 consecutive quarters.

Continental Airlines Inc.

The nation's fifth-largest airline reported a second-quarter net loss of $139 million, blaming the weak economy, lower fares and the cost of security measures enacted after Sept. 11.

Continental reported a $42 million gain for last year's second quarter.

The quarterly loss was equivalent to $2.18 a share, compared with a gain of 74 cents a share a year earlier. The loss occurred despite a $447 million gain from the initial public offering of stock for its ExpressJet subsidiary. Excluding a previously announced after-tax charge of $96 million related to its fleet and other one-time costs, the company said, the operating loss was $35 million, or 55 cents a share. Analysts had predicted a loss of 76 cents a share.

Second-quarter revenue was $2.1 billion, 14.8 percent less than in the 2001 quarter. Continental attributed the lower revenue to traffic and capacity declines and widespread industry fare discounting.

Charles Schwab Corp.

The slumping online stockbroker said recent market turmoil continued to pinch its profit in the second quarter. The San Francisco-based company earned $98 million, or 7 cents a share, down slightly from net income of $102 million, or 7 cents a share, in last year's second quarter. The results were a penny below analysts' estimates.

If not for a one-time charge, Schwab said, it would have earned $106 million in this year's quarter. Though that would have been slightly better than last year's performance, it would have been below analysts' expectations.

Schwab reported that its second-quarter revenue decreased to $1.05 billion, down from $1.07 billion last year.

The Associated Press and Bloomberg News contributed to this article.

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