Consumers are getting stingy. At least, that's the message from
, which all reported first-quarter results Wednesday.
Altria, formerly known as Philip Morris, said profits fell 7.6% in the first quarter amid a sharp decline in domestic tobacco revenues, and Maytag reported a 39% drop in earnings, as demand for its high-priced home appliances was weak. Meanwhile, Coca-Cola's North American volume rose just 3% from last year, as the industry was negatively affected by "poor weather conditions and weaker traffic in restaurants, hotels and leisure channels."
Coke still managed to post a jump in earnings from last year, however, and met analysts' estimates, while Altria beat profit targets by a penny. Maytag missed earnings forecasts by 5 cents a share.
In afternoon trade, New York-based Altria was down almost 2% to $31.88, while Coke shed 6% to $39.98 and Maytag skidded 13% to $19.03. Altria and Coke were a big part of the
Dow Jones Industrial Average's
120-point decline, a tumble that was in stark contrast to the
, where a slew of positive earnings reports were driving a 7-point gain.
Consumer spending suffered in the first quarter, as a war with Iraq and concerns about a terrorist attack on domestic soil kept consumers out of shopping malls and restaurants. But analysts had hoped that once the war was over, spending would ramp up. So far, however, the outlooks from consumer staples and consumer cyclical companies have been tepid.
Although Altria was able to reaffirm its numbers for the full year, Maytag said it expects a full-year profit of $1.80 to $1.90 a share, including a 50-cent charge for a plant closing and job cuts. Analysts were expecting the firm to earn $2.73 a share, excluding charges. Coca-Cola doesn't provide guidance on future earnings.
Consumer staples stocks are projected to show an earnings decline of 1% in the first quarter, but profits are expected to recover in the second quarter, with growth of 5%. The sector is also expected to see a 5% jump in profits for the full year, according to Thomson Financial/First Call.
Consumer cyclical stocks, which are more tied to changes in the economy, are expected to show stronger growth this quarter, with profits rising 16%. Upside surprises from
have helped to lift that number, but GM warned Tuesday that it might miss estimates going forward. Both companies benefited greatly from their finance arms, too.
Analysts expressed disappointment with some of the results from the consumer sector Wednesday. Prudential Securities analyst Nicholas Heymann lowered his rating on Maytag to sell from hold, saying a dividend cut is possible because the shift to high-end appliances is not paying off. S&P puts its credit rating on watch, with negative implications.
Coke's numbers also elicited little enthusiasm among analysts, with J.P. Morgan's John Faucher noting that sales volume, a key measure of financial health in the soft drink sector, was weak in many of its markets around the world.
"Volume results for each region except for Asia came in below forecast," he said. "North America was most disappointing."
Overall, unit case volume rose 4% in the quarter. In Europe and the Middle East, volume actually fell 1%, although it rose 8% in Asia.
Legg Mason analyst Mark Swartzberg took aim at the quality of Coke's earnings, and cut his rating to hold from buy. He said the firm's operating income, excluding one-time items and a shift in accounting for options expenses, was up just 3.5% in the quarter and that sales volume was well below the firm's target of 5% to 6%. He also noted that trends in Japan, which amounts to 20% of Coke's profits, worsened notably in March.
As for Altria, analysts were disappointed that U.S. tobacco sales fell 24% while income slid 41%, but they did note that the firm has increased its retail share. Philip Morris USA's total retail share in the first quarter climbed to 48.3% from 48.1% in the fourth quarter, while Marlboro's retail share was up fractionally to 37.5%, as the firm spent more money on promotions and increasing sales staff.
Altria reported earnings of $2.19 billion, or $1.07 a share, compared to $2.37 billion, or $1.09 a share, in the same period a year ago. Analysts were expecting $1.06 per share, according to First Call. The company also reaffirmed full-year estimates of $4.60 to $4.70 a share this year. Analysts surveyed by Thomson Financial/First Call are looking for a profit of $4.61 a share.
Although the results beat consensus estimates, Louis Camilleri, chairman and chief executive of Altria, said the quarter was "clearly overshadowed by developments in the price class-action suit against Philip Morris USA."
Earlier this month, an Illinois court ruled that the firm had deceived customers into thinking light cigarettes were less harmful than regular brands. Judge Nicholas Byron had ordered the company to post a $12 billion bond to appeal the case, but he reduced the amount on Monday to just $6 billion.
At Coke, net income came in at $835 million, or 34 cents a share, compared to a loss of $194 million, or 8 cents a share, in the same period a year earlier. Revenue rose 10% to $4.5 billion from $4.08 billion. Excluding one-time items, the firm earned 37 cents, in line with the estimates.
Maytag posted earnings of $34.5 million, or 44 cents a share, down from $56.8 million, or 73 cents a share, in the year-earlier period. That result included an 8-cent charge, but the firm still missed analysts' 57-cent estimate due to weak sales of its Hoover vacuum cleaners and sluggish demand for its high-priced refrigerators, dishwashers and washing machines.