Chesapeake Tumbles After Earnings Warning - TheStreet

Shares of



fell sharply Monday after the specialty packaging and merchandising services company warned that it would report earnings that would be far lower than projections by analysts.

Chesapeake revised its projected earnings to 10 cents to 15 cents a share in its second quarter -- less than half of the consensus estimate of 33 cents a share expected by analysts polled by

First Call/Thomson Financial

. The company's revised earnings expectations of $1.85 to $2.05 a share for the fiscal year were also lower than the $2.30 consensus.

Shares of Chesapeake ended down 3 3/8, or 10%, at 29 3/16.

Chesapeake's revised expectations for the second quarter were comparable to its earnings of 14 cents a share in the first quarter. The Richmond-based corporation blamed the projected stagnancy on delays by several major U.S. consumer products companies of their promotional programs and new product introductions -- delays that hurt U.S. point-of-purchase sales and operating margins, a measure of operating efficiency.

Molly Remes, a spokeswoman for Chesapeake, said the corporation could not provide numbers for point-of-purchase sales or operating margins.

"While we are disappointed with the near-term results in our U.S. display business, order activity is strengthening and we anticipate more favorable results in the second half of 2000, as well as positive year-over-year improvement," Thomas H. Johnson, Chesapeake's chairman and chief executive, said in a statement.

He added that the corporation was "pleased" with its other businesses' performance, citing the progress of the integration of

Boxmore International

, a leading European packaging company, and anticipation of strong results in Chesapeake's European packaging segment.

Stephen Keane, an analyst for

Robert W. Baird & Co.

, said most other companies in the sector are not experiencing similar earnings problems, and Chesapeake's difficulties are most likely "a short-term event." Keane said Chesapeake's business is focused on the second half of the year, when display sales in the U.S. and Europe increase because of holiday season purchases. "They're having their slower period now," Keane said.

Keane added that Chesapeake's revised earnings projections are to a certain degree "not that surprising," since

Procter & Gamble

(PG) - Get Report

has had

problems lately that have hurt its new product introductions. He said Procter & Gamble, which has faced a series of earnings disappointments, may have been behind deferred orders for point-of-purchase displays from Chesapeake. Robert W. Baird & Co. has a market outperform rating on Chesapeake. It has done no recent underwriting for the company.

Chesapeake is slated to announce its second-quarter results on July 20.