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Airlines report profits, bemoan rising fuel costs

Thu., Jan. 24, 2008

Airline consolidation may not be the panacea for the industry amid persistently high fuel prices, but observers say it would help by removing domestic capacity from the system.

As several major carriers talk about possible combinations, two airlines – Delta and Southwest – gave investors another dose of reality in saying Wednesday their future results will continue to be weighed down by the cost of fuel.

Delta Air Lines Inc. officials were mum on the status of talks with Northwest Airlines Corp. and UAL Corp.’s United Airlines about possible combinations, as the Atlanta-based carrier reported fourth-quarter results that were hampered by jet fuel costs.

Southwest Airlines Co. reported its profit almost doubled in the fourth quarter, but said fuel costs in the current quarter will rise substantially for the Dallas-based carrier.

For the current quarter, Southwest estimated fuel costs of $2 a gallon, up from $1.72 per gallon in the fourth quarter.

Delta reported Wednesday that for the three months ending Dec. 31, it lost $70 million, or 18 cents a share, compared to a loss of $1.98 billion for the same period a year earlier. The airline did not provide a per share figure for the prior year, when it was in bankruptcy.

Excluding reorganization items, Delta said it lost $105 million in the latest quarter.

Revenue in the fourth quarter rose 10 percent to $4.68 billion, compared to $4.25 billion recorded a year earlier.

Southwest said that in the fourth quarter its net income rose to $111 million, or 15 cents per share, compared to a year-earlier profit of $57 million, or 7 cents per share. Revenue rose to $2.49 billion from $2.28 billion a year earlier. Excluding special items, the company reported a profit of 12 cents per share.

Delta shares rose $1.13, or 7.6 percent, to $15.98 Wednesday. Southwest shares rose 78 cents, or 6.5 percent, to $12.76.

Capital One Financial Corp.‘s fourth-quarter profit fell 42 percent, hurt by charges from shutting down its GreenPoint Mortgage business, the credit card company said Wednesday

Capital One said its fourth-quarter profit totaled $226.6 million, or 60 cents per share, in the September-December period, compared with $390.7 million, or $1.14, in the same period a year earlier.

Excluding the company’s $95 million charge related to the shutdown of its troubled GreenPoint Mortgage unit, Capital One posted fourth-quarter earnings of 85 cents per share.

Pfizer Inc., the world’s largest drugmaker, beat Wall Street earnings expectations for the fourth quarter, raised its 2008 revenue outlook and said it is on track to rebuild its product pipeline.

The company said fourth-quarter profit fell 70 percent from a year-ago period that included hefty gains on the sale of the company’s consumer health business, but adjusted profit and sales both topped Wall Street expectations.

It earned $2.88 billion, or 42 cents per share, in the fourth quarter, down from $9.45 billion, or $1.32 per share, a year ago, which included divestiture gains of $1.11 per share. Excluding items, net income in the latest period totaled $3.6 billion, or 52 cents per share.

Motorola Inc.‘s new CEO Greg Brown spooked investors Wednesday with a gloomy assessment of the cell phone maker’s inability to turn around its ailing handset division, saying a recovery will take longer than expected.

Shares nose-dived almost 23 percent to a 4 ½-year low on the company’s outlook for worse-than-anticipated first-quarter results.

Motorola also reported results from the fourth quarter that were about as weak as analysts had feared, with net profit falling 84 percent and mobile phone sales down 38 percent.

The company earned profits of $100 million in the fourth quarter – small by Motorola’s historical standards. It amounted to 4 cents per share and was down from a year-earlier profit of $623 million, or 25 cents per share. Sales fell to $9.65 billion from $11.79 billion a year earlier.

General Dynamics Corp. said Wednesday that higher sales of combat vehicles to the Army and corporate jets pushed fourth-quarter earnings up 42 percent, but the defense contractor’s 2008 outlook fell short of Wall Street forecasts.

Net income jumped to $579 million, or $1.42 per share, in the three months ended Dec. 31, from $408 million, or $1 per share, in the year-ago period. Sales rose 15 percent to $7.52 billion, but missed Wall Street’s estimate of $7.55 billion.

General Dynamics forecast profit of $5.55 to $5.65 per share in 2008, citing a funded backlog of $37.2 billion at year’s end. • Record oil prices at the end of 2007 helped ConocoPhillips post a 37 percent increase in fourth-quarter profit, even as the third-largest U.S. oil company produced less crude and natural gas than a year earlier.

ConocoPhillips said Wednesday its fourth-quarter net income rose to $4.37 billion, or $2.71 per share, compared with $3.2 billion, or $1.91 per share, during the same period a year earlier.

Revenue increased to $52.7 billion from $41.5 billion a year ago.

Sallie Mae, the embattled student lender, said Wednesday it lost $1.6 billion in the fourth quarter as borrowing costs rose and it set aside $575 million to cover bad loans.

The October-December loss at Sallie Mae was equivalent to $3.98 a share, compared with a profit of $18 million, or 2 cents a share, in the fourth quarter of 2006.

Sallie has slashed its earnings forecast for this year, recently held a special sale of stock to raise $2.9 billion in cash and is cutting 350 jobs from its workforce of 11,000 to help reduce costs 20 percent by 2010. The company’s newly installed executive team expects that $625 million to $700 million will have to be set aside this year for soured student loans.

The company reported a loss on a “core” basis of $139 million, or 36 cents a share in the fourth quarter, compared with profit of $326 million, or 74 cents a share, a year earlier.

Netflix Inc.‘s fourth-quarter profit soared past analyst expectations as the online DVD rental service gained 451,000 customers, providing further evidence the company has regained the upper hand in its bruising battle with rival Blockbuster Inc.

The Los Gatos-based company said Wednesday that it earned $15.8 million, or 24 cents per share, for the final three months of 2007. That was 6 percent more than its net income of $14.9 million, or 21 cents per share, in the same period a year earlier.

Revenue climbed 9 percent to $302.4 million, up from $277.2 million the prior year. Netflix ended December with 7.48 million subscribers, up from 7.03 million in September.

• Online auction company eBay Inc. reported a 53 percent gain in fourth-quarter profits due to a strong holiday season. It beat Wall Street’s expectations, though its future guidance was tepid.

The San Jose-based company said that in the last three months of 2007 it earned $530.9 million, or 39 cents per share. Revenue in the quarter rose 27 percent to $2.18 billion.

Excluding stock-option expenses and other charges, eBay said it would have earned $611 million, or 45 cents per share.

Meg Whitman will soon step down as chief executive of eBay, which went from wobbly startup to multibillion-dollar household name in her 10-year tenure. Whitman will remain on eBay’s board of directors.


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