Ford, Occidental Petroleum & Pulte Homes See Weakest Profits In 4 Years

Discussion in 'Stocks' started by ByLoSellHi, Feb 12, 2007.


    Ford, Pulte Reduce U.S. Profit Growth to Slowest in Four Years

    By Courtney Dentch

    Feb. 12 (Bloomberg)
    -- U.S. profits increased at the slowest pace in more than four years last quarter because of a record loss at Ford Motor Co. and earnings declines at Occidental Petroleum Corp. and Pulte Homes Inc.

    Companies posted a 9.7 percent gain in fourth-quarter profit through Feb. 9, with 75 percent of Standard & Poor's 500 Index members having reported, according to data compiled by Bloomberg. Quarterly profits of the S&P 500 have climbed by at least 10 percent since the third quarter of 2002.

    ``We've had a long streak of double-digit growth, and it looks like we're going to break that,'' said Alec Young, an equity strategist at Standard & Poor's in New York.

    The biggest slump in home sales in 15 years battered homebuilders including Pulte, while a drop in fuel prices hurt natural gas producers and refiners such as Occidental and Sunoco Inc. Results in those industries, along with the loss at Ford, the world's third-largest automaker, countered surging profits at financial companies like Goldman Sachs Group Inc., the biggest securities firm, and raw materials producers DuPont Co. and Alcoa Inc., the largest producer of aluminum.

    Coming quarters may not be much better for some energy producers, homebuilders and related companies.

    ``What we have seen worldwide is not as much demand'' for oil, Barry James, a money manager at James Investment Research in Xenia, Ohio, said after Exxon Mobil Corp., the world's biggest oil company, reported a 4.3 drop in fourth-quarter profit on Feb. 1. ``If we see some softening in the U.S. economy, that's going to ripple throughout the energy sector.''

    Homebuilder Woes

    Shares of homebuilders and mortgage companies fell last week after Toll Brothers Inc., the largest U.S. builder of luxury homes, said orders had plunged and London-based HSBC Holdings Plc said bad home loans increased in the U.S.

    ``Despite what people might say in terms of the bottoming in the housing market, if we are at the bottom, we're not going to get off this bottom for at least a year or two,'' Ernie Ankrim, chief investment strategist at Russell Investment Group in Tacoma, Washington, said Feb. 8.

    Ford's fourth-quarter loss of $5.76 billion, or $3.50 a share, dragged average earnings down. Excluding Ford, the companies reporting through Feb. 9 would have posted a gain of 11.4 percent. Dearborn, Michigan-based Ford, the second-biggest U.S. automaker, lost a record $12.7 billion for the year on a plunge in sales of pickup trucks and sport-utility vehicles.

    Bloomfield Hills, Michigan-based Pulte, the second-largest U.S. homebuilder by market value, lost $8.4 million, or 3 cents a share, while Dallas-based Centex Corp., the fourth-largest, lost $228 million, or $1.90 a share. Both were profitable a year earlier.

    Appliances, Electronics

    The housing slump also hurt Whirlpool Corp., the world's largest appliance maker, and Black & Decker Corp., the biggest U.S. maker of power tools. Both reported lower profits.

    Earnings of Best Buy Co., the nation's largest electronics retailer, rose 8.7 percent, less than it had forecast, while No. 2 Circuit City Stores Inc. posted an unexpected loss of $16 million, or 9 cents a share.

    Price-cutting on flat-screen televisions by Wal-Mart Stores Inc., the world's largest retailer, hurt Best Buy and Circuit City, S&P's Young said.

    ``Wal-Mart moving into that category is a killer,'' he said. `` They can really compete heavily on price.'' Wal-Mart is scheduled to report fiscal fourth-quarter results on Feb. 20.

    Companies in the consumer discretionary sector as tracked by Bloomberg have reported a 29 percent drop in earnings for the quarter, the worst showing of the 10 groups monitored.


    Energy companies were the second-worst performers, with a 12 percent drop in earnings. Profit fell 13 percent at Houston-based ConocoPhillips, the biggest U.S. natural gas producer, as gas prices dropped 44 percent from a year earlier.

    Philadelphia-based Sunoco, the largest oil refiner in the U.S. Northeast, posted a 57 percent drop in profit, while Los Angeles-based Occidental, the fourth-biggest oil company, said profit fell 19 percent.

    DuPont, the third-largest U.S. chemicals producer, is among the companies that have kept the quarter's profit growth close to the recent 10 percent benchmark. The Wilmington, Delaware-based company said profit rose almost sixfold on tax gains and surging sales in Europe and Asia.

    New York-based Alcoa said earnings jumped 60 percent on a 27 percent rise in the metal's price.

    Best Performers

    ``There's still a lot of global growth and these companies are tapping into these developing markets,'' said Nick Raich, who helps manage $33 billion as director of research at National City Private Client Group in Cleveland.

    The materials group so far has posted a 51 percent increase in profit, the biggest gain among the 10 groups monitored, according to Bloomberg data.

    Financial companies have recorded a 35 percent increase, the second-biggest gain. New York-based Goldman Sachs reported a 93 percent jump, while St. Paul Travelers Cos., the second- biggest U.S. commercial insurer, said profit was almost seven times higher than a year earlier.