Earnings roundup: Breakfast sales perk up profits

Strong breakfast sales in the U.S. and a weak dollar overseas proved a potent combination for McDonald’s Corp. in the third quarter, helping to power the fast-food chain to a 27 percent jump in profit despite rising costs.

The Oak Brook, Ill.-based company reported earnings Friday that were in keeping with preliminary results released last week, posting an impressive $1.07 billion in net income. McDonald’s executives said they hope to keep the momentum going with more new products, hinting that specialty coffees such as cappuccinos, lattes and mochas may be coming soon on the heels of its success with premium roast coffee.

The big question is how long McDonald’s can keep up its hot streak in the face of soaring dairy and other commodity costs, higher labor expenses and prospects that the dollar will strengthen.

Carl Sibilski, managing director of Chicago-based Oyster Capital Management, said McDonald’s is doing a good job selling products that people want. But he said its surge may be exaggerated by all the help it’s getting from the weak dollar.

Heavy-equipment maker Caterpillar Inc. said Friday that its third-quarter earnings rose 21 percent, but lowered its outlook for the year based on slow U.S. economic growth.

Shares of both Caterpillar and its competitors fell, leading the Dow Jones industrial average down more than 350 points.

Peoria, Ill.-based Caterpillar earned $927 million, or $1.40 a share, compared with $769 million, or $1.14 a share in the year-ago quarter.

Revenue increased 9 percent to $11.44 billion, from $10.52 billion in the prior-year period. The company cited strength in integrated services, which is its business that combines financial services, parts, logistics and other operations, that offset slow North American sales of machinery and truck engines.

Diversified manufacturer Honeywell International Inc. reported a 14 percent rise in third-quarter earnings Friday and boosted its outlook for full-year profit and sales.

But its shares fell nearly 4 percent amid a broad market pullback. One analyst said Honeywell’s profit margins in its transportation and automation and controls segments were disappointing, while another said the retreat was healthy.

Net income grew to $618 million, or 81 cents per share, for the three months ended Sept. 30 from $541 million, or 66 cents per share, in the prior-year period.

Quarterly revenue jumped 10 percent to $8.74 billion, from $7.95 billion in the third quarter of 2006, driven by growth in sales to commercial, defense and space markets.

Xerox Inc. said Friday strong demand for color printers and office services led to a third-quarter profit that beat Wall Street expectations, although earnings tumbled 53 percent from year-ago results boosted by a tax gain.

The Stamford-based office equipment maker earned $254 million, or 27 cents per share, for the quarter ended Sept. 30, down from $536 million, or 54 cents per share, a year ago.

The 2006 figures included a tax gain of 45 cents a share that was partly offset by restructuring and litigation charges of 14 cents per share.

A continued sluggish U.S. market for motorcycles pushed Harley-Davidson Inc.‘s third-quarter profit down 15.3 percent, and the motorcycle maker said it expects next year to be difficult, too.

Domestic buyers are seeing oil prices rising and the home market crumbling, so they’re being cautious about spending, even when it comes to the iconic brand’s bikes, chief executive Jim Ziemer said in an interview.

“It’s all of those, with the consumer on the sidelines saying ‘We’re going to wait and see what’s going on,’ ” he said.

Domestically, sales were down 2.5 percent in the three months ended Sept. 30, while the overall U.S. heavyweight market fell 4.4 percent.

Overseas, Harley’s sales were up 8.8 percent. Worldwide retail sales of Harley-Davidson motorcycles were flat in the quarter, down 0.2 percent. Revenue dropped 5.8 percent to $1.54 billion from $1.64 billion last year.

The company had figured sales would be difficult, so they cut bike shipments and earnings expectations in September.

Shipments were down 10.8 percent to 86,535 units.