Earnings: 3M, Merck, UPS, JetBlue

Published January 30, 2007

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Earnings: 3M | Merck | UPS | JetBlue

3M Profit Weaker

CHICAGO (Reuters) - Diversified manufacturer 3M Co. (MMM) posted a weaker-than-expected quarterly profit Tuesday and said global economic growth was slowing slightly, sending shares down 3.7 percent.

The maker of such products as Scotch tape, Post-It notes, Thinsulate insulation and a host of other products also provided a 2007 profit outlook that could fall below expectations.

In giving the outlook for this year, Chief Executive George Buckley cited "slightly moderating economic growth worldwide."

Net income in the fourth quarter rose 58 percent to $1.2 billion, or $1.57 a share, from $746 million, or 97 cents a share, a year earlier.

Excluding a $354 million gain, largely from the sale of its branded drug business, it earned $1.10 a share. That was 4 cents below what analysts polled by Reuters Estimates had expected.

In October, the company, considered a bellwether for the U.S. economy because of its extensive product portfolio, had forecast a fourth-quarter profit, excluding one-time items, of $1.10 to $1.16 a share.

Investors have worried about a slowdown in the U.S. economy and look to companies like 3M for clues to the future.

Sales rose 8.6 percent from last year to $5.78 billion, above the $5.76 billion analysts had forecast.

Sales in local currencies grew 5.8 percent, with U.S. demand hurt by the significant housing slowdown. It had previously forecast growth in the range of 4 percent to 8 percent.

Overall volume growth in the quarter was 6.8 percent, with growth in ongoing businesses at 4.9 percent. However, pricing fell 1 percent, dragged down by declines overseas.

3M, based in St. Paul, Minnesota, expects 2007 earnings in the range of $5.20 to $5.45 a share, including a net gain for restructuring actions of about 60 to 70 cents a share. Analysts were expecting $5 a share before one-time items.

It expects full-year local-currency sales growth, adjusted for the divestiture of the branded drug business, of 6 percent to 10 percent. That includes about 1.5 percentage points for acquisitions. Including the drug sales in 2006, it expects sales growth this year of 2 percent to 6 percent.

Shares of 3M fell to $76 a share in early electronic trading from its Monday closing price of $78.96 on the New York Stock Exchange.

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Merck & Co. Profit Falls, But Beats Wall Street Views

NEW YORK (Reuters) - Merck & Co. (MRK) said Tuesday fourth-quarter earnings fell sharply due to special charges and generic competition for its Zocor cholesterol drug, but company sales handily beat Wall Street forecasts.

The company said it earned $474 million, or 22 cents per share, compared with $1.12 billion, or 51 cents per share, in the year-earlier period.

Excluding special items, the drug maker earned 50 cents per share. Analysts, on average, expected 51 cents per share, according to Reuters Estimates.

The special charges including $466 million related to Merck's purchase in late December of Sirna Therapeutics, a biotechnology company that makes drugs using the promising new technology of RNA interference.

Merck also took a $75 million charge to set aside additional funds for legal costs of fighting tens of thousands of lawsuits that allege harm from the company's recalled Vioxx arthritis drug.

The company reaffirmed it expects earnings this year of $2.51 to $2.59 per share, excluding restructuring charges, little changed from its profit of $2.52 per share last year.

Merck said it remains on track to deliver double-digit compound annual earnings growth by 2010, excluding one-time items and restructuring charges.

Quarterly results were dragged down by Zocor, until recently Merck's biggest product, whose sales plunged 65 percent to $379 million due to U.S. generic competition that began last summer.

Despite Zocor's free fall, Merck said company revenues rose 5 percent to $6.04 billion, due to strong sales growth of many of its other medicines and vaccines. The Reuters Estimates forecast was $5.36 billion.

Sales of asthma drug Singulair jumped 17 percent to $960 million, while combined revenue from hypertension drugs Cozaar and Hyzaar rose 11 percent to $865 million.

Vaccine sales doubled to $683 million, fueled by demand for three recently launched vaccines — including the first vaccine against strains of the virus that causes cervical cancer and the first shingles vaccine.

Combined sales of Merck's newer cholesterol fighters, Vytorin and Zetia, soared 46 percent to $1.1 billion in the quarter. Merck splits profits from the medicines with Schering-Plough Corp..

UPS Earnings Meet Expectations, But Outlook Weak

CHICAGO (Reuters) - Package delivery company United Parcel Service Inc. (UPS) on Tuesday reported quarterly net profit that met market expectations but issued a full-year outlook for 2007 below analyst forecasts.

The company's stock slid more than 3 percent in pre-market online trading after the announcement.

Citing a boost from fourth-quarter peak season retail sales and strong growth in its international business, the Atlanta-based company reported fourth-quarter net income of $1.13 billion, or $1.04 a share, compared with $1.05 billion, or 95 cents a share, a year earlier.

On average Wall Street analysts had forecast earnings per share for the quarter of $1.04, according to Reuters Estimates.

The world's largest package-delivery company said it expected full-year 2007 earnings per share to rise by 6 percent to 10 percent, or within a range of $4.10 to $4.25.

This fell short of the full-year earnings per share of $4.26 predicted by Wall Street analysts, according to Reuters Estimates.

For the fourth quarter UPS reported revenue of $12.6 billion, compared with $12 billion a year earlier. This was below the revenue analysts had predicted for the quarter of $12.85, according to Reuters Estimates.

UPS said its holiday peak season saw the number of packages rising, with 22 million packages shipped on two days and the number of days when it shipped more than 20 million packages reached seven compared with five days in 2005.

The company also reported that revenue at its international business grew by nearly 10 percent to $2.44 billion from $2.22 billion a year earlier.

In pre-market trading UPS shares were down $2.39 from Monday's close at $71.26.

JetBlue Posts Profit

NEW YORK (Reuters) - Low-cost airline JetBlue Airways Corp. (JBLU) said Tuesday it posted a fourth-quarter profit after a year-ago loss as higher fares and more flying capacity led to a 42 percent jump in revenues.

JetBlue, the No. 8 U.S. carrier by passenger traffic, posted a net profit of $17 million, or 10 cents per share, compared with a loss of $42 million, or 25 cents per share, a year ago.

Wall Street analysts expected JetBlue to post a profit of 11 cents per share, according to Reuters Estimates.

Operating revenues rose to $633 million from $446 million as JetBlue increased capacity by 14.5 percent. Yield per passenger mile, a reflection of average ticket prices, rose 25 percent in the quarter.

JetBlue has been looking to increase fares even at the expense of filling seats as it looks to improve profits. Load factor — a measure of the percentage of plane seats filled by paying passengers — fell 1.4 points to 79.7 percent.

Despite the improvement, JetBlue guided toward a loss in the first quarter, forecasting a pretax margin of negative 4 percent to negative 2 percent. But the New York-based carrier expects a profit for the year, forecasting a pretax margin of between 5 percent and 7 percent.

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