General Electric yesterday reported a 1% rise in second-quarter earnings on lower revenues, citing an improving US market and reaffirming its 2013 targets to increase profit margins.
Net income at the US industrial behemoth came in at $3.13bn, about 1% above the year-ago figure of $3.10bn.
Net income on an operating basis came in at 36¢ per share, matching analyst expectations. This figure excludes non-operating pension costs.
Net income on a per-share basis was 30¢, up one cent or 3% from last year.
GE’s revenue came in shy of expectations at $35.1bn, compared with forecasts of $35.6bn. Net revenues a year ago were $36.4bn.
GE recorded profit growth in six of seven industrial segments.
But results in the power and water segment, currently the company’s largest industrial group by revenue, fell by 17%. Profits in this group dropped to $1.1bn from $1.3bn. Analysts have said this unit was hit by declining wind and gas turbine orders.
On the flip side, profits in aviation and oil and gas grew by 16% and 14% respectively.
Analysts were also eyeing the earnings for an update on GE’s target of improving industrial segment profit margins by 70 basis points in 2013. The company said it was “on track” to meet this target, adding that it gained 50 basis points of industrial profit margin growth in the quarter.
GE also reaffirmed plans to reduce the size of its GE Capital financing arm, to sharpen its identity as an industrial company. Profits in this segment shrank nine% to $1.9bn.
Honeywell
Honeywell International reported stronger-than-expected quarterly earnings, helped by a lower tax bill, cost cutting and increased sales of security systems and turbochargers.
The company, which counts the US military, Boeing and Airbus among its biggest customers, has been cutting costs and improving productivity.
Honeywell posted a 13% increase in second-quarter net income and said margins increased in most of its businesses, which include products for the aerospace, automobile and energy industries.
The earnings beat was mainly driven by a lower tax rate, which added 6 cents to second-quarter earnings, analysts said. The effective tax rate for the quarter fell to 23.1% from 26% a year earlier.
Honeywell, whose products include cockpit electronics and systems to manage the security of large buildings, reported earnings of $1.28 per share, topping the average analyst estimate by 7¢, according to Thomson Reuters I/B/E/S.
Also, pension and post-retirement benefit payments fell to $32mn during the quarter from $308mn a year earlier. The company’s operating income margin rose to 14.3% from 13.6%.
Honeywell raised the low end of its current-year pro-forma earnings-per-share forecast to $4.85 from $4.80. The top end was unchanged at $4.95.
Second-quarter sales increased 3% to $9.69bn, below analysts’ estimate of $9.70bn.
Honeywell shares were up about 0.4% at $83.32 in early trading on the New York Stock Exchange on Thursday.
Whirlpool
Whirlpool Corp posted a stronger-than-expected jump in quarterly profit and raised its full-year outlook yesterday, citing sales gains in all of its markets, including Europe and North America.
The results suggested US and eurozone consumer confidence may be turning the corner after being battered by debt crises and austerity measures in Europe and a weak economic recovery and high unemployment in the US.
Investors were searching for such signs of growth as China’s economy continued to slow. Whirlpool, the world’s largest appliance maker, and Swedish rival Electrolux AB have been anxious for signs of a rebound in mature markets. Sluggish sales there have forced them to rely more on still-growing markets and shift production from high-wage countries to lower-cost centres.
Whirlpool reported second-quarter profit of $198mn, or $2.44 a share, up from $113mn, or $1.43 share, during the same period last year.
Sales at the maker of Whirlpool, Maytag and KitchenAid appliances rose 5.3% to $4.74bn.
The mean of analysts’ estimates was for net income of $189mn and revenue of $4.66bn, according to Reuters data.
For Whirlpool, the gains were led by big unit sales increases in Europe and Latin America, where revenue rose nearly 6%, and the US, where revenue was up 5.1%.
Whirlpool’s focus on margin improvement was reflected in operating profit in Europe and Latin America, which jumped 77% and 31%, respectively.
The Benton Harbor, Michigan-based company increased its full-year diluted earnings forecast to a range of $10.05 to $10.55 a share from $9.80 to $10.30.
Reliance Industries
Reliance Industries, India’s largest private firm, yesterday reported a 19% rise in quarterly net profit, beating estimates as better margins from refining offset lower natural gas output.
The energy giant, controlled by India’s wealthiest man Mukesh Ambani, said consolidated net profit rose 18.9% to Rs53.52bn ($896mn) in the three months ended June, from Rs45.03bn a year ago.
“Reliance achieved strong results during the first quarter, while investing in projects that will provide sustainable advantage for a longer period,” Ambani said in a statement.
The earnings beat analysts’ expectations of a Rs52.7bn profit.
Reliance’s gross refining margins (GRMs) for the first quarter rose 10.5% to $8.4 a barrel from $7.6 a year earlier. Turnover however fell 4.6% to Rs905.8bn.
Analysts have been concerned in recent months about Reliance’s ability to boost gas production from its oil blocks off India’s east coast.
Crude oil production from Reliance’s main oil field KG-D6 fell 41% year-on-year to just 0.5mn barrels of crude oil, a company statement said.
Natural gas production slid 53% to 49.2bn cubic feet (BCF), over levels a year earlier.
In 2011, British energy giant BP paid $7.2bn to acquire a 30% stake in 21 of Reliance’s oil and gas fields.
Reliance hopes that BP’s deepwater drilling expertise will give the Indian giant the skills to develop hard-to-exploit reserves and find more oil.
Reliance operates the world’s largest oil-processing complex in Jamnagar, where two adjacent refineries have a combined capacity to process 1.24mn barrels of oil a day.
Reliance has built up a war chest for acquisitions, with cash reserves of more than 930.66bn rupees ($15.6bn) as of the June-end quarter.
The energy behemoth has been scouting for acquisitions and looking to diversify its revenue sources by expanding into financial services, retailing, hotels and communications.
The company said revenues for its retail business rose 53% to Rs34.74bn. It now operates more than 1,500 stores in 134 cities across the country.
Ambani has also announced a foray into the Indian media sector as well as telecom.
Last month, Mukesh and younger brother Anil, who fought a very public feud for spoils of their father’s business empire, announced a $2.1bn deal to share telecom tower infrastructure, cementing a reconciliation between the once-warring siblings.
Reliance Jio Infocomm, the telecom unit of Mukesh Ambani-led Reliance Industries, signed the agreement with Reliance Communications, the flagship firm of the Anil Ambani group, to share the latter’s telecom tower equipment.
Yara
Yara, the world’s biggest nitrogen fertiliser maker by sales volume, said strong demand from farmers for its premium crop nutrients helped offset pressure on prices from Chinese competitors.
The Norwegian firm said deliveries rose 21% to a record-high level in the second quarter as cheaper fertilizer and higher food prices encouraged farmers to buy.
That helped the company, which has about 10% of the global nitrogen fertiliser market, post a smaller-than-expected drop in core earnings.
Yara’s average selling price for urea, a basic fertiliser, was 27% lower in the quarter compared with a year ago as Chinese exports dictated market prices.
A cut in export tax from China, the world’s biggest fertiliser producer, from July 1 threatens to flood the global market further and put more downward pressure on prices.
Yara said it benefited from strong demand for its blended NPK product that sells at a relatively stable premium over the ingredients — urea, potassium and phosphates — for which market prices have fallen and dented earnings for rivals such as US rival Mosaic.
Rising food prices and cheaper fertiliser are encouraging farmers to use high-quality products to boost crops, Yara’s chief executive Jorge Halstead said.
Yara said it had gained market share in Europe — its biggest market — where spring deliveries were delayed after a cold March, without giving figures.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), excluding one-off items, fell to 4.07bn crowns ($679.03mn) from 5.19bn in the year-ago period but beat analyst expectations for 3.67bn.
Revenues increased 8% to 23.2bn crowns, compared with a forecast 8% decline.
Yara, which last month postponed a planned expansion at its Canadian plant fearing oversupply, said other companies outside China were doing the same, without citing examples.
Cheap North American shale gas has prompted fertiliser makers to invest heavily in new capacity in the region, with many new projects due to be completed in 2015 and beyond. Some of these have now been put on hold, Yara said.
Interpublic
Interpublic Group of Cos, home to advertising agencies McCann Erickson and Draftfcb, said it would focus on controlling costs after reporting a lower-than-expected second-quarter profit.
The No 2 US advertising company’s profit fell 19% mainly due to higher costs and a bigger tax bill but domestic revenue rose for the second straight quarter.
The rebounding US ad market helped larger rivals Omnicom Group and Publicis Groupe report better-than-expected earnings this week.
Interpublic’s revenue from the US rose 4.8%, double its overall revenue growth. The US accounted for about 57% of revenue in the quarter.
But operating expenses rose 2.7%, led by a 2.9% rise in salaries and related expenses.
Provision for income taxes rose by $12mn to $62mn, as the company’s effective tax rate rose to 41.9% from 32.3%.
Interpublic said it still aimed for a margin improvement of 50 basis points for the full year. The company’s operating margin fell to 10.0% in the latest quarter from 10.3% a year earlier.
Net income available to shareholders fell to $79.9mn, or 18 cents per share, from $99mn, or 22 cents per share, a year earlier. Revenue rose to $1.76bn.
Analysts on average had expected earnings of 22 cents per share on revenue of $1.75bn, according to Thomson Reuters I/B/E/S.
Google
Google said yesterday its second-quarter profit rose 16% from a year ago, but its results fell far short of market expectations.
The Internet giant reported a profit of $3.23bn, up from $2.79bn a year ago. The adjusted earnings translated to $9.56 per share, far below Wall Street expectations of $10.78.
Revenues were up 19% to $14.11bn, also below most analyst forecasts.
Google shares tumbled 4.1% in after-hours trade on the news, to $873.49, in a retreat from the Internet giant’s record run toward the $1,000 level.
But Google’s chief executive Larry Page put a positive spin on the report.
“Google had a great quarter with over $14bn in revenue — up 19% year-on-year,” said Page.
“The shift from one screen to multiple screens and mobility creates tremendous opportunity for Google.
“With more devices, more information, and more activity online than ever, the potential to improve people’s lives even more is immense.”
Google said 55% of its revenues, or $7.2bn, came from outside of the US, roughly the same amount as the past quarter and the same period last year.
Revenues from Motorola Mobile, the handset maker it acquired last year, were $998mn, up from $843mn in the same period a year ago. But the unit posted an operating loss of $342mn, wider.
Scania
Swedish truck manufacturer Scania announced yesterday that it would step up production to meet demand in Europe, after a decline in profits in the second quarter.
Profits fell 5% in the second quarter from the figure a year earlier to 1.376bn kronor (160mn euros, $210mn), even as sales jumped 19% to 22.798bn kronor.
The decline in profits was mainly due to rising operating costs.
According to Scania, the second half is expected to be favourable as customers rush to buy trucks before new tougher emission standards kick in.
As Euro 5 trucks are cheaper, orders in Europe were up 25% year on year in the second quarter, the company said.
Microsoft
Microsoft Corp yesterday reported lower-than-expected quarterly earnings as slow personal computer sales ate into its Windows business and the company took an unexpected $900mn charge for its inventory of unsold Surface tablets.
The massive charge underlines the struggles of the world’s largest software company, which last week announced a deep reorganisation to transform itself into a “devices and services” leader, but is struggling to make mobile computing as attractive as Apple or Google.
Microsoft said the $900mn charge was related to its Surface RT tablet, the version of its tablet running on ARM Holdings-designed chips. The Surface was meant to challenge Apple’s iPad when it was launched alongside Windows 8 in October, but has not sold well.
Earlier this week, Microsoft said it was drastically cutting prices and expanding distribution of the model to entice buyers, reducing the value of Surface devices in its inventory.
Wall Street had estimated earnings of 75 cents per share, on average, according to Thomson Reuters I/B/E/S. Excluding the Surface charge, Microsoft reported 66¢ per share profit, a less drastic miss.
Revenue rose 10% to $19.9bn, helped by sales of Microsoft’s Office suite of applications, but fell short of analysts’ average estimate of $20.7bn.
Sales of Windows rose slightly, but only because of the inclusion of some deferred revenue, weighed down by an estimated 11% dip in PC sales in the quarter.
Microsoft’s Windows 8 has sold more than 100mn licences since launching in October, but is struggling to win over many consumers confused by the new design which is more suited to tablets than traditional PCs. Acknowledging this, Microsoft is releasing a revamped version of the system called Windows 8.1 later this year, which brings back the iconic ‘start’ button.
State Street Corp
State Street Corp’s second-quarter profit rose 25%, beating Wall Street estimates, as compensation costs fell and revenue increased from managing money, servicing client assets and trading foreign currencies.
The Boston-based bank said yesterday it earned $571mn, or $1.24 a share, compared with $455mn, or 98¢ a share, a year earlier. Analysts, on average, expected $1.19 a share, according to Thomson Reuters I/B/E/S.
Revenue from foreign exchange surged 33% to $171mn as the Boston-based bank took advantage of more volume and volatility in global currency markets. Investment management fees rose 13% to $277mn.
Servicing fees, which provide the lion’s share of revenue, rose 11% to $1.2bn.
Total operating revenue was $2.58bn, up 4.9%.
The bank cut compensation costs by 11% compared with the first quarter. Those expenses have been a bone of contention among some large State Street investors, who have complained about them being too high compared to peer banks.
Compensation and employee benefit expenses were $917mn in the quarter, down from $1.04bn in the first quarter and 3% lower than the second quarter of 2012.
