- The Washington Times - Tuesday, July 23, 2002

Lost amid the daily reports of sliding stock prices, pitiful earnings and executive misbehavior are solid earnings reports from defense contractors, home builders and key Dow Jones industrials such as Coca-Cola, 3M and General Motors.
Rising profits are hardly the norm these days, but several companies in the past two weeks have reported quarterly earnings topping their performances from a year ago.
Big names including Coca-Cola Co., General Motors Corp. and, for the first time, Nextel Communications Inc. made the list of companies reporting solid profits. Some sectors saw increased earnings nearly across the board.
Many companies are simply taking advantage of their prominence in their respective sectors. Others are reaping rewards from increased government expenditures or are benefiting from the weakness of the U.S. dollar overseas.
Atlanta-based Coca-Cola made headlines last week when it said it would start recording stock options as an expense. The government has urged many companies to make this move as part of attempts to curb accounting scandals. But Coca-Cola also piqued the interest of many investors Wednesday when it announced that net income for the quarter ended June 30 rose to $1.29 billion (52 cents a share) from $1.12 billion (45 cents) in the like quarter of 2001.
"Coke looks good," said Richard Cripps, chief marketing strategist with Legg Mason Wood Walker Inc. in Baltimore. "It's a huge beneficiary of a weak dollar because of its sales out of the United States."
Analysts also said new products from Coca-Cola, such as Vanilla Coke, helped to increase profits.
General Motors climbed out of a post-September 11 slump with earnings that nearly doubled those of last year. For the second financial quarter, which ended June 30, GM earned $1.5 billion ($2.63 per share) from $766 million ($1.37) a year earlier.
Meanwhile, 3M Co., best known as the maker of Post-it Notes, said yesterday that net income rose to $466 million ($1.18 per share) from $202 million (50 cents) a year earlier. It ended four straight quarters of falling revenue.
Wal-Mart Stores Inc., the nation's largest retailer, said same-store sales for July were in line with forecasts. Same-store sales are those that exclude the effects of new stores and are the best measure of a retailer's performance. Wal-Mart announced record first-quarter earnings in May and was expected to announce second-quarter earnings Aug. 13.
Perhaps the biggest earnings highlight of last month came from Nextel, which recorded its first profit. The Reston wireless communications company said its net income for the second quarter this year was $123 million (39 cents per share) compared with a loss of $369 million (56 cents) during the second quarter of 2001.
Most large home builders also have reported solid earnings amid continued strong demand for housing. NVR Inc., a McLean home builder, said Friday that earnings for the quarter ended June 30 rose to $83.8 million ($8.90 per share) from $59.4 million ($6.10) a year ago. The mortgage banking segment of its business rose from $3.6 million to nearly $11 million.
"The large home builders have done very well," said David Weaver, a Legg Mason analyst who covers the sector. "NVR is in one of the hottest markets in the country. The new orders continue to look very good."
Earnings have not helped NVR's stock price, however. Prices of company shares have fallen more than 20 percent since July 5, when they peaked at $322. They closed yesterday at $245.
Mr. Weaver and other analysts said they expected positive earnings from other home builders, including Toll Brothers Inc. The Huntington Valley, Pa., company will report third-quarter earnings Aug. 8. In May, Toll Brothers reported record income of $52.5 million (69 cents per share) in the second quarter, up from $45.8 million (58 cents) from the like quarter in 2001.
Defense contractors also have gone against the grain by reporting improved earnings. The larger defense companies, particularly those without heavy involvement in the troubled commercial airline sector, all made money in the most recent quarter, thanks in part to increases in defense spending by the government.
"The whole group has really done well," said Paul Nisbet, an analyst with JSA Research Inc. in Newport, R.I. "General Dynamics did better than expected, Lockheed did better than expected all the companies that are predominantly defense."
Falls Church-based General Dynamics Corp. saw earnings for the quarter ended June 30 rise to $263 million ($1.29 per share) from $227 million ($1.12) a year earlier.
Bethesda-based Lockheed Martin Corp. more than doubled its net income from $144 million (33 cents per share) during the second quarter of 2001 to $339 million (79 cents) in the second quarter this year. Also scoring big gains were Los Angeles-based Northrop Grumman Corp. and Cleveland-based TRW Inc., the company Northrop Grumman said it would acquire last month.



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