Chevron Profit Rises as Unrest Lifts Oil Prices

 

The Chevron Corporation said Friday that its first-quarter profit rose 36 percent as economic growth and supply disruptions drove crude prices above $100 a barrel.

Net income rose to $6.21 billion, or $3.09 a share, from $4.55 billion, or $2.27, a year earlier, Chevron said. Sales rose 25 percent, to $60.3 billion.

Global demand for petroleum-derived fuels rose 2.9 percent during the first quarter, led by growth in China, Brazil and India, according to the International Energy Agency. Oil futures traded in New York climbed 20 percent to average $94.60 a barrel, driven in part by the civil unrest in North Africa and the Middle East that has imperiled crude supplies.

Stock in Chevron, which is based in San Ramon, Calif., rose 63 cents, to $109.44 a share.

Profit from the company’s oil and natural gas business increased 27 percent to $5.98 billion as higher commodity prices offset an output decline of less than 1 percent. Chevron said it pumped the equivalent of 2.76 million barrels of crude during the period, down from 2.78 million a year earlier.

Chevron’s refineries earned $622 million, more than three times the profit of the first quarter of 2010.

 

Merck’s Quarterly Profit Surges on Sales and Cost Savings

 

The results beat Wall Street expectations and suggest drug sales and cost savings from acquiring Schering-Plough were starting to pay off.

Merck shares rose 18 cents Friday to close at $35.95. Net income in the quarter was $1.04 billion, or 34 cents a share, up from $299 million, or 9 cents a share, in 2010’s first quarter.

Revenue edged up 1 percent to $11.58 billion. That includes several billion dollars from products added in the Schering-Plough acquisition in November 2009. Excluding numerous one-time items, net income was $2.86 billion, or 92 cents a share.

On that basis, analysts had forecast earnings of 84 cents a share and revenue of $11.38 billion. Analysts typically exclude one-time items in their estimates.

The $1.82 billion in net charges included $1.58 billion in merger-related write-downs on the value of assets and research, $126 million in restructuring costs and a $500 million payment to settle arbitration with Johnson & Johnson over the rights to two drugs. A year ago, Merck had charges totaling $2.31 billion.

Merck, based in Whitehouse Station, N.J., raised the bottom end of its 2011 profit forecast by 2 cents, predicting $3.66 to $3.76 a share, or $2.04 to $2.39 including one-time charges.

Production costs fell 22 percent to $4.06 billion, partly because Merck has sold some factories.

A Jeffries & Company analyst, Ian Hilliker, wrote to investors that the higher revenue and lower-than-expected costs gave Merck a strong “earnings beat.”

Top-performing drugs included Singulair and Januvia, plus some drugs acquired with Schering: the allergy spray Nasonex and Remicade for immune disorders. Their growth was partly offset by a $356 million drop in revenue from two former blockbuster heart drugs, Cozaar and Hyzaar, caused by generic competition.

Januvia and Janumet, a pill that combines Januvia with the generic diabetes drug metformin, had combined quarterly sales that topped $1 billion for the first time, up 47 percent.

Total pharmaceutical revenue rose 2 percent to $9.82 billion. Two units Merck acquired with Schering, animal health and consumer health, also performed well. Animal health revenue rose 7 percent and consumer health 6 percent, on strong sales of Claritin allergy pills and Coppertone sun care products.

 

A.M.D.’s Profit Bolstered by Sales of Chips for Netbooks

SAN FRANCISCO (Reuters) — The chip maker Advanced Micro Devices topped earnings expectations for the quarter on Thursday and predicted revenue in the current period that was in line with forecasts.

The company said it had strong demand for its recently released chips aimed at netbooks, a niche dominated by its larger rival Intel, but which is also under pressure from increasing tablet sales.

The chief executive of A.M.D., Dirk Meyer, left the company in early January after disagreements with its board about what the company’s strategy in the growing market for tablets and smartphones should be, and he has yet to be replaced.

Net income in the first quarter was $510 million, or 68 cents a share, compared with $257 million, or 35 cents a share, in the same period last year.

Revenue was $1.61 billion, up 2 percent year over year.

The company, based in Sunnyvale, Calif., said it expected second-quarter revenue to be flat or slightly down, compared with the first quarter.

Analysts had expected revenue of $1.61 billion for the first quarter and $1.59 billion for the second quarter.

On the basis of nongenerally accepted accounting principles, A.M.D. said its earnings were 8 cents a share, higher than the 5 cents that analysts on average expected, according to Thomson Reuters.

“What we saw from the Intel results, and what we’re seeing again from A.M.D. today, doing a bit better than expected, is probably a positive sign about the state of the aggregate PC world,” an analyst at Longbow Research, JoAnne Feeney, said.

On Tuesday, Intel posted better-than-expected results, helping reduce fears that the popularity of Apple’s iPad was cutting into PC sales.

But A.M.D. has less exposure than Intel to corporate customers, making it more sensitive to consumers’ whims.

And while any growth for A.M.D. in netbooks would increase its market share, the segment has low margins compared with more robust notebook and desktop PCs.

A.M.D. is also releasing new chips, code-named Llano, aimed at laptops and desktops that will compete with Intel’s recently introduced Sandy Bridge chips. Both offer integrated graphics processing meant to make additional graphics chips unnecessary.

 

Xerox Reports Rise in Profit and Revenue

Net income was $281 million, or 19 cents a share, in contrast to a loss of $42 million, or 4 cents a share, in the period a year earlier. Excluding some costs, profit was 23 cents a share. Analysts estimated 21 cents on average.

Sales climbed 16 percent, to $5.47 billion, led by services, which gained 27 percent.

Sales from equipment and supplies was little changed, which may have disappointed some investors, said Keith Bachman, an analyst at BMO Capital Markets. “It’s uninspiring,” Mr. Bachman said. “It’s a reasonable report, but it doesn’t give anybody a reason to go out and buy the stock.”

Shares of Xerox fell 63 cents, or 5.81 percent, to $10.22.

The company, based in Norwalk, Conn., has been reducing costs, including 5,000 job cuts last year, as it integrates Affiliated Computer Services. The company may save more than $375 million in three years as a result of the takeover, Xerox has said.

Xerox said profit this quarter, excluding some costs, will be 23 cents to 26 cents a share, a larger range than the company typically gives for its quarterly forecasts as it assesses its business in Japan. That compares with analysts’ estimates of 25 cents.

The company, whose Fuji Xerox joint venture manufactures and distributes copiers and printers for Japan, China and other countries in the Asia-Pacific region, said it expects last month’s earthquake in Japan to affect its equity income this quarter and the third quarter.

While Fuji Xerox factories were not damaged, several of its suppliers were affected by the earthquake, the chief executive, Ursula M. Burns, said. The company is making alternate plans for supplies and expects to have increased supply chain costs, she said.

 

A.M.D.’s Profit Bolstered by Sales of Chips for Netbooks

SAN FRANCISCO (Reuters) — The chip maker Advanced Micro Devices topped earnings expectations for the quarter on Thursday and predicted revenue in the current period that was in line with forecasts.

The company said it had strong demand for its recently released chips aimed at netbooks, a niche dominated by its larger rival Intel, but which is also under pressure from increasing tablet sales.

The chief executive of A.M.D., Dirk Meyer, left the company in early January after disagreements with its board about what the company’s strategy in the growing market for tablets and smartphones should be, and he has yet to be replaced.

Net income in the first quarter was $510 million, or 68 cents a share, compared with $257 million, or 35 cents a share, in the same period last year.

Revenue was $1.61 billion, up 2 percent year over year.

The company, based in Sunnyvale, Calif., said it expected second-quarter revenue to be flat or slightly down, compared with the first quarter.

Analysts had expected revenue of $1.61 billion for the first quarter and $1.59 billion for the second quarter.

On the basis of nongenerally accepted accounting principles, A.M.D. said its earnings were 8 cents a share, higher than the 5 cents that analysts on average expected, according to Thomson Reuters.

“What we saw from the Intel results, and what we’re seeing again from A.M.D. today, doing a bit better than expected, is probably a positive sign about the state of the aggregate PC world,” an analyst at Longbow Research, JoAnne Feeney, said.

On Tuesday, Intel posted better-than-expected results, helping reduce fears that the popularity of Apple’s iPad was cutting into PC sales.

But A.M.D. has less exposure than Intel to corporate customers, making it more sensitive to consumers’ whims.

And while any growth for A.M.D. in netbooks would increase its market share, the segment has low margins compared with more robust notebook and desktop PCs.

A.M.D. is also releasing new chips, code-named Llano, aimed at laptops and desktops that will compete with Intel’s recently introduced Sandy Bridge chips. Both offer integrated graphics processing meant to make additional graphics chips unnecessary.

 

Xerox Reports Rise in Profit and Revenue

Net income was $281 million, or 19 cents a share, in contrast to a loss of $42 million, or 4 cents a share, in the period a year earlier. Excluding some costs, profit was 23 cents a share. Analysts estimated 21 cents on average.

Sales climbed 16 percent, to $5.47 billion, led by services, which gained 27 percent.

Sales from equipment and supplies was little changed, which may have disappointed some investors, said Keith Bachman, an analyst at BMO Capital Markets. “It’s uninspiring,” Mr. Bachman said. “It’s a reasonable report, but it doesn’t give anybody a reason to go out and buy the stock.”

Shares of Xerox fell 63 cents, or 5.81 percent, to $10.22.

The company, based in Norwalk, Conn., has been reducing costs, including 5,000 job cuts last year, as it integrates Affiliated Computer Services. The company may save more than $375 million in three years as a result of the takeover, Xerox has said.

Xerox said profit this quarter, excluding some costs, will be 23 cents to 26 cents a share, a larger range than the company typically gives for its quarterly forecasts as it assesses its business in Japan. That compares with analysts’ estimates of 25 cents.

The company, whose Fuji Xerox joint venture manufactures and distributes copiers and printers for Japan, China and other countries in the Asia-Pacific region, said it expects last month’s earthquake in Japan to affect its equity income this quarter and the third quarter.

While Fuji Xerox factories were not damaged, several of its suppliers were affected by the earthquake, the chief executive, Ursula M. Burns, said. The company is making alternate plans for supplies and expects to have increased supply chain costs, she said.

 

IPhone Sales Help Profit and Revenue at Verizon

Verizon Communications posted strong first-quarter growth in wireless subscribers, helped by sales of the Apple iPhone, but the effect on its earnings failed to impress investors.

With subscriber growth barely beating Wall Street estimates, some analysts complained about profit margins and others said revenue growth was lower than they had hoped at Verizon Wireless, the mobile venture of Verizon and the Vodafone Group.

Verizon Wireless posted net additions of 906,000 subscribers, just slightly ahead of expectations from analysts contacted by Reuters, who had predicted more than 888,000 subscribers.

While Verizon Wireless, the top mobile service, added only slightly more subscribers than it did in the fourth quarter, it was well ahead of its archrival, AT&T, which added 62,000 net subscribers in the quarter.

But a crucial point for investors when comparing the two was that AT&T, even though it no longer had exclusive rights to the iPhone, won more new iPhone customers in the quarter than Verizon.

The expectation had been that hordes of customers would flee AT&T when the Verizon iPhone arrived because popular phones typically experience a surge in sales during the quarter when they are introduced.

“It was a stronger new customer driver for AT&T,” Steve Clement, an analyst at Pacific Crest, said.

Verizon, which put the iPhone on store shelves on Feb. 10, said it sold 2.2 million iPhones by the end of the quarter, compared with the 3.6 million iPhone sales at AT&T, which had the phone for the entire quarter.

About 22 percent of Verizon’s iPhone customers switched from rival carriers, but about 23 percent of AT&T’s were also new to that company. This implies that Verizon won fewer than 500,000 new customers through the iPhone, while AT&T added more than 800,000 iPhone customers from other carriers.

In addition, higher sales of advanced devices like the iPhone came at a high cost for Verizon as its profit margin dipped, Michael Nelson, a Mizuho analyst, said.

Its margin was 43.7 percent, compared with the 46 percent it posted a year earlier, based on earnings before interest, taxes, depreciation and amortization.

While the iPhone helped Verizon raise subscriber numbers, its sales were not significantly better than analyst expectations, as some investors had hoped.

“Over all it was a solid quarter, not necessarily a blowout quarter,” Mr. Nelson said.

Verizon earnings rose to $1.44 billion, or 51 cents a share, from $443 million, or 16 cents a share in the same quarter a year ago, when it shouldered hefty one-time charges.

Revenue rose to $26.99 billion, from $26.9 billion in the year-earlier period; the average analyst expectation was $26.86 billion, according to Thomson Reuters.

Shares of Verizon fell 88 cents, or 2.3 percent, to close at $36.91.

 

Defying Doubters, AT&T Profit Rises 39%

 

AT&T, the nation’s largest telecommunications company, reported a 39 percent increase in its first-quarter profit on Wednesday, despite losing the exclusive rights to sell the iPhone in the United States midway through the period.

The company posted net income of $3.4 billion, or 57 cents a share, up from $2.5 billion, or 41 cents a share, a year earlier. Revenue climbed more than 2 percent, to $31.2 billion from $30.5 billion.

AT&T’s income met Wall Street forecasts while its revenue was slightly better than the forecast for $31.26 billion, but the company’s stock fell 18 cents, to $30.13 a share.

AT&T said it activated 3.6 million iPhone accounts during the period, nearly a million more than it activated a year earlier, easing concerns that Verizon, which began selling the iPhone in February, would cut into its market share immediately.

Nearly a quarter of the new iPhone subscribers were new to AT&T. The company also said that the number of subscribers who left the carrier stayed roughly the same as last year. In addition, AT&T added two million wireless subscribers in the quarter, a slight increase from the 1.9 million that it added in the first quarter a year earlier. AT&T’s overall pool of subscribers, which includes cable and land line customers, rose to 97.5 million, a 12 percent increase from a year earlier.

“We entered this quarter and this year with questions and uncertainty, in part related to the end of the iPhone exclusivity and its impact,” said Richard Lindner, the chief financial officer of AT&T, during a call to analysts and investors. “Hopefully we’ve answered those questions.”

Ralph de la Vega, the company’s chief mobility officer, said AT&T’s marketing push, which included commercials that highlighted technical limitations of Verizon’s CDMA network that do not allow smartphone owners to make voice calls and simultaneously perform data functions like browsing the Web, as being instrumental in retaining subscribers.

The company also attributed the popularity of connected devices like tablet computers, Kindles and personal Wi-Fi hot spots, as lifting the company’s profits. AT&T and third-party retailers sold 421,000 of those during the quarter, although the vast majority of those sales were iPad 3Gs, which made up 322,000 of those sales.

But analysts said it might be too soon to determine what the overall impact of the Verizon iPhone will be on AT&T.

“Is this as bad as it gets or will the real impact come only later with the iPhone 5,” wrote Craig Moffett, an analyst with Sanford C. Bernstein Research, in a note to investors.

The fifth-generation of the iPhone, which some speculate could be introduced by Apple in the fall, might be the true litmus test for the carriers, who will have to compete for customers whose current contracts are expiring as well as those intending to upgrade.

Mr. Moffett noted that while AT&T did, however, beat analysts’ expectations that it would lose about 50,000 of its contract subscribers, adding instead 62,000 contract customers, the figure was down from the same period a year earlier, when AT&T gained 512,000 new customers on contract.

Charles S. Golvin, a wireless industry analyst at Forrester Research, said the majority of the growth in the wireless industry stemmed from people who have never had a smartphone before.

“At this point, there aren’t any new contract customers in the United States,” he said. “It’s all about smartphone newcomers and stealing customers away from their competitors.” He noted that for the time being AT&T was still selling an older version of the iPhone, the 3GS, for $49, which might be behind the surge in iPhone activations for AT&T.

“There is something really appealing to someone who has never had a smartphone before to be able to get one for $50,” he said. But once the iPhone 5 arrives, he said, “we’ll really see how much customers care about the network they are on.”

 

DealBook: Wells Fargo Profit Jumps, but Revenue Falls Slightly

 Noah Berger/Bloomberg News

8:20 p.m. | Updated

Wells Fargo & Company posted a 48 percent increase in first-quarter profit on Wednesday, but investors were not impressed by the results, given fears that sluggish mortgage loan growth would erode the bank’s earnings power.

Shares of the bank, which is based in San Francisco, fell 4.1 percent as traders looked past bottom-line earnings of $3.8 billion and focused on slow top-line growth.

Revenue fell 5.2 percent to $20.3 billion as rising interest rates caused the mortgage refinancing boom to slow down.

The bank, which is the nation’s biggest mortgage underwriter, said that home loan origination volume fell by more than 34 percent from the fourth quarter.

Nonetheless, Wells Fargo beat analysts’ estimates by a penny and recorded a record profit with the help of some sophisticated financial management.

The bank reduced the amount it set aside to cover future loan losses by about $3 billion from a year ago even as its pile of bad loans decreased.

The reserve reduction strategy has been a favorite of the major banks this quarter, as they have all taken advantage of the improved economy to lower loan-loss provisions. That leaves more money to be counted as profit, although it can camouflage underlying weakness.

Other giant banks with big Wall Street businesses were able to make up for some of the missing income with stronger results from investment banking and trading. But Wells Fargo, which is more oriented to retail banking, could not.

However, Timothy J. Sloan, Wells Fargo’s newly installed chief financial officer, brushed aside concerns that Wells Fargo would be severely hurt by a fall-off in its mortgage business.

“If rates go up, it is probably because the economy is going to grow,” he said in an interview. “And if the economy is growing, it’s more likely the rest of our businesses will grow.” With an improved economy, he said, he foresees a pickup in its wealth management and small business lending operations, as well as finding new profits by deploying more than $100 billion of cash it has on hand.

Investors were not convinced. Wells Fargo’s stock fell $1.24, to $28.83 a share, while shares of its rivals, Bank of America, Citigroup, and JPMorgan Chase, were flat.

Along with the slowdown in mortgage lending, Wells Fargo faces rising operating costs for servicing loans that are headed into foreclosure, especially after reaching a deal with federal regulators this month to increase staff levels and improve oversight.

Wells Fargo said it took a quarterly charge of about $214 million on its mortgage servicing business after factoring in the higher operating expenses.

The bank has strengthened internal processes and hired 1,000 staff members after adding several thousand last year.

Wells also said it was setting aside an additional $472 million to cover other foreclosure expenses, like fines and litigation costs. That is up from about $193 million in the fourth quarter.

Like the other big banks, Wells Fargo may be required to buy back bad loans it sold to Fannie Mae, Freddie Mac and other private investors.

In the first quarter, the bank set aside $249 million to cover future repurchases, after setting aside $464 million in the fourth quarter.

Still, the spill of red ink has slowed. Although the housing market and broader economy remain fragile, Wells Fargo said it had released $1 billion from its loan loss reserves in the first three months of the year and expected to continue drawing down its reserves in the coming quarters.

“We wanted to see more sustained performance in the improvement of the portfolio,” Mr. Sloan said. “We have seen that trend continue.”

 

Defying Doubters, AT&T Profit Rises 39%

AT&T, the nation’s largest telecommunications company, reported a 39 percent increase in its first-quarter profit on Wednesday, despite losing the exclusive rights to sell the iPhone in the United States midway through the period.

The company posted net income of $3.4 billion, or 57 cents a share, up from $2.5 billion, or 41 cents a share, a year earlier. Revenue climbed more than 2 percent, to $31.2 billion from $30.5 billion.

AT&T’s income met Wall Street forecasts while its revenue was slightly better than the forecast for $31.26 billion, but the company’s stock fell 18 cents, to $30.13 a share.

AT&T said it activated 3.6 million iPhone accounts during the period, nearly a million more than it activated a year earlier, easing concerns that Verizon, which began selling the iPhone in February, would cut into its market share immediately.

Nearly a quarter of the new iPhone subscribers were new to AT&T. The company also said that the number of subscribers who left the carrier stayed roughly the same as last year. In addition, AT&T added two million wireless subscribers in the quarter, a slight increase from the 1.9 million that it added in the first quarter a year earlier. AT&T’s overall pool of subscribers, which includes cable and land line customers, rose to 97.5 million, a 12 percent increase from a year earlier.

“We entered this quarter and this year with questions and uncertainty, in part related to the end of the iPhone exclusivity and its impact,” said Richard Lindner, the chief financial officer of AT&T, during a call to analysts and investors. “Hopefully we’ve answered those questions.”

Ralph de la Vega, the company’s chief mobility officer, said AT&T’s marketing push, which included commercials that highlighted technical limitations of Verizon’s CDMA network that do not allow smartphone owners to make voice calls and simultaneously perform data functions like browsing the Web, as being instrumental in retaining subscribers.

The company also attributed the popularity of connected devices like tablet computers, Kindles and personal Wi-Fi hot spots, as lifting the company’s profits. AT&T and third-party retailers sold 421,000 of those during the quarter, although the vast majority of those sales were iPad 3Gs, which made up 322,000 of those sales.

But analysts said it might be too soon to determine what the overall impact of the Verizon iPhone will be on AT&T.

“Is this as bad as it gets or will the real impact come only later with the iPhone 5,” wrote Craig Moffett, an analyst with Sanford C. Bernstein Research, in a note to investors.

The fifth-generation of the iPhone, which some speculate could be introduced by Apple in the fall, might be the true litmus test for the carriers, who will have to compete for customers whose current contracts are expiring as well as those intending to upgrade.

Mr. Moffett noted that while AT&T did, however, beat analysts’ expectations that it would lose about 50,000 of its contract subscribers, adding instead 62,000 contract customers, the figure was down from the same period a year earlier, when AT&T gained 512,000 new customers on contract.

Charles S. Golvin, a wireless industry analyst at Forrester Research, said the majority of the growth in the wireless industry stemmed from people who have never had a smartphone before.

“At this point, there aren’t any new contract customers in the United States,” he said. “It’s all about smartphone newcomers and stealing customers away from their competitors.” He noted that for the time being AT&T was still selling an older version of the iPhone, the 3GS, for $49, which might be behind the surge in iPhone activations for AT&T.

“There is something really appealing to someone who has never had a smartphone before to be able to get one for $50,” he said. But once the iPhone 5 arrives, he said, “we’ll really see how much customers care about the network they are on.”