Merck Profit Up 14% Amid Slump in Specialty Drug Sales

Merck & Co., the nation’s largest drug company, said first-quarter profit rose a lower-than-expected 14% amid declining sales of its anti-cholesterol drugs, Zocor and Mevacor.

In other earnings reports, Mattel Inc. and Hasbro Inc., the nation’s largest toy makers, said first-quarter results were in line with diminished Wall Street forecasts, as both companies were hit by changes in buying at Toys R Us Inc., the nation’s biggest toy retailer.

Paramus, N.J.-based Toys R Us said in February that it would cut inventories by $500 million by 2000 in a bid to lower costs and boost sluggish earnings.

Merck said its net income rose to $1.16 billion, or 95 cents a diluted share, from $1.02 billion, or 82 cents, a year earlier. Sales rose 9% to $6.06 billion. the Whitehouse Station, N.J.-based company had been expected to earn 97 cents a share, based on the average estimate of analysts polled by IBES International Inc.

Merck’s sales of Zocor were $875 million in the quarter, up 9% from a year earlier but down from $1 billion in the fourth quarter. Sales of Mevacor plunged 36% from a year ago to $175 million. Mevacor sales were $275 million in the fourth quarter.

“Zocor is Merck’s billion-dollar drug, and it’s not doing a billion in sales anymore,” said Charles Engelberg, an analyst with AmeriCal Securities Inc. “Our big concern with Merck is that one day Zocor and Mevacor are going to fall out of bed.”

Merck shares fell $4.06 to close at $119.44 on the New York Stock Exchange, leading a decline in most U.S. drug makers.

At a Glance

Other companies reporting earnings, shown as operating profit, Thursday, included:

* Hasbro, the No. 2 U.S. toy maker, said its first-quarter earnings fell 70% to $7.79 million, or 6 cents a diluted share, from $25.7 million, or 20 cents, a year earlier. Sales fell 13% to $482.8 million.

Pawtucket, R.I.-based Hasbro, which is in the midst of a restructuring, said sales fell 13% to $482.8 million, hurt by the changes at Toys R Us and the stronger dollar.

The maker of Hasbro brand toys and Milton Bradley games said inventory reductions at Toys R Us will also hurt its second-quarter earnings.

* El Segundo-based Mattel said its first-quarter net income more than doubled as strong sales in its top brands helped offset difficulties from the changes at Toys R Us. Mattel, the nation’s largest toy maker, earned $12.7 million, or 4 cents a share, compared with $5.1 million, or a penny a share, a year ago, on a 2% sales increase to $705 million. It said sales of its Barbie dolls and Sesame Street and Fisher-Price infant and preschool toys were particularly strong. Analysts had expected earnings of 3 cents a share.

* Gillette Co. said its first-quarter profit rose a less-than-expected 14% as lower orders for its Sensor razors partly offset stronger sales of Duracell batteries and Braun appliances. Net income rose to $268 million, or 47 cents a diluted share, from $236 million, or 41 cents, a year ago. The results missed analyst forecasts by 2 cents a share. Revenue rose 1.3% to $2.03 billion.

Gillette said earnings were hurt for a second straight quarter as retailers reduced their Sensor inventories in anticipation of the new Mach3 razor release in July. The effect of the strong dollar in Asia and Europe also clipped some of the company’s businesses.

PAPER:

* Champion International reported first-quarter net income of $19 million, or 20 cents a diluted share, beating analyst estimates of 17 cents. That contrasts with a year-earlier loss of $37.1 million, or 39 cents. Revenue rose 8.1% to $1.48 billion.

* Georgia-Pacific Corp.’s Georgia-Pacific Group earned $16 million, or 17 cents a diluted share, contrasted with a loss of $13 million, or 14 cents, a year earlier. Analysts had expected a loss of 3 cents a share. Revenue rose 3.2% to $3.19 billion.

* Jefferson-Smurfit said first-quarter profit was $11 million, or 10 cents a share, falling short of estimates of 12 cents a share. That contrasts with a year-earlier loss of $7 million, or 6 cents a share. Sales rose 8.5% to $844 million.

FINANCIAL SERVICES:

* Capital One Financial Corp. said net income rose 55% in the first quarter to $65.7 million, or 96 cents a diluted share, from $42.5 million, or 63 cents, a year ago, beating estimates of 84 cents. The credit card company’s revenue rose 36% to $637.4 million.

* Dime Bancorp Inc., parent of Dime Savings Bank of New York, said first-quarter earnings rose 52% to $50.1 million, or 43 cents a diluted share, from $32.9 million, or 31 cents, a year earlier. An increase in deposits and fees from mortgages at the thrift led the earnings gain, which exceeded analyst estimates of 41 cents a share.

* KeyCorp first-quarter earnings rose 11% as fees increased in areas including investment banking, capital markets and trust. The bank holding company said net income rose to $235 million, or 53 cents a diluted share, from $212 million, or 47 cents, a year earlier. Analysts had expected a gain of 54 cents a share.

OTHER INDUSTRIES:

* Continental Airlines Inc.’s first-quarter earnings rose 9.5% to $81 million, or $1.06 a diluted share, exceeding analyst estimates of 99 cents, on lower fuel prices and increased ticket sales. The company earned $74 million, or 96 cents, a year ago. Revenue jumped 9% to $1.85 billion.

* General Dynamics Corp. said first-quarter net income rose 15% on strong sales at its Marine Group and new Information Systems unit. The defense contractor’s profit rose to $82 million, or 65 cents a share, from $71 million, or 56 cents, a year earlier. Analysts had expected 72 cents a share. Sales rose 22% to $1.15 billion.

* Hambrecht & Quist Group said earnings in its fiscal second quarter more than doubled as it boosted income from stock offerings and advisory work. The San Francisco-based brokerage said net income was $16 million, or 60 cents a diluted share, far exceeding an estimate of 49 cents, compared with $7.5 million, or 29 cents, a year earlier. Revenue jumped 44%.

* Hughes Electronics Corp. said earnings more than doubled in the first quarter. It cited higher commercial satellite sales as well as a smaller loss at its DirecTV satellite television business. The Los Angeles-based unit of General Motors Corp. earned $53.7 million, or 13 cents a share, in the first quarter, up from $23.9 million, or 6 cents, a year ago, on a 26% jump in revenue to $1.29 billion.

* Marriott International Inc. said its first-quarter profit rose 29% to $89 million, or 33 cents a diluted share, up from $69 million, or 26 cents, a year ago, as the strong economy continued to spur travel and allowed the hotel company to boost prices for its rooms. Sales rose 15% to $1.77 billion. The results nearly matched analyst estimates of 32 cents a share.

* Pier 1 Imports Inc. said fiscal fourth-quarter earnings rose 33% to $23.8 million, or 33 cents a diluted share, exceeding analyst estimates, from $17.9 million, or 25 cents, in the year-ago quarter. The retailer of home furnishings said revenue rose 14% to $325.3 million. The results exceeded analysts’ estimate of 31 cents a share.

* Sprint Corp.’s first-quarter profit fell a less-than-expected 27% as strong sales to business customers and lower fees helped offset wider losses from new wireless and international ventures. Net income for the No. 3 U.S. long-distance company fell to $211.8 million, or 48 cents a diluted share, from $289.7 million, or 67 cents, a year earlier. Revenue rose 9% to $3.91 billion.