Philip Morris’ 4th Quarter Boosted by Price Hike, Growing Units

Philip Morris Cos. said fourth-quarter earnings rose 2.7%, boosted by higher cigarette prices and growth in its Kraft food and Miller beer units.

The world’s largest tobacco company said profit from operations rose to $1.81 billion, or 77 cents a share, from $1.77 billion, or 72 cents, a year ago. Sales rose 4.4% to $19.2 billion. The results missed the 78-cents-a-share average estimate of analysts polled by First Call/Thomson Financial.

Philip Morris led the tobacco industry in August in raising cigarette prices 11%, mostly to offset a Jan. 1 rise in the federal excise tax and higher costs in 2000 tied to a 1998 settlement agreement.

Lifting prices months ahead of those events helped push the company’s U.S. cigarette profit up after three straight quarters of declines.

Philip Morris also benefited from lower costs in North America at its Kraft food unit and an increase in sales from its Miller beer business.

Shares of Philip Morris fell 88 cents to close at $21.06 in New York Stock Exchange trading.

“The market hasn’t cared much for tobacco fundamentals in the past year because of the litigation risks,” Credit Suisse First Boston analyst Bonnie Herzog said. “That should start to change in 2000 as we see some resolution of some of the industry’s legal challenges.”

Cigarette shipments in the U.S. declined 4.1% during the quarter as retailers placed fewer orders while they cleared out inventory ahead of the rise in the federal excise tax, the company said.

Meantime, lower duty-free sales and weakened economies in Eastern Europe and Latin America hurt overseas cigarette shipments, which fell 3.1%.

Still, tobacco profit rose 1.1% on an 18-cent increase in cigarette prices charged to U.S. wholesalers.

Profit at Kraft North America rose 4.6% on lower commodity costs and savings derived from past restructuring efforts. Miller beer profit surged 83% on higher prices and the acquisition of beer brands from Stroh Brewery Co. and Pabst Brewing Co.

At a Glance

Other earnings, excluding one-time gains or charges unless noted, include:

* Alaska Air Group Inc., parent of Alaska Airlines and regional carrier Horizon Air, said fourth-quarter earnings plunged 45% to $14.8 million, or 56 cents a share, as fuel and labor costs rose. The results matched estimates. Revenue grew 9.8% to $501.9 million.

* AirTran Holdings Inc. posted operating profit of $10.6 million, or 15 cents a share, for the fourth quarter, a turnaround from a loss of $3 million, or 5 cents. The discount airline operator said higher average fares and a decline in unit costs contributed to the results, which far exceeded analyst estimates of 10 cents. Revenue rose 17% to $123.4 million.

* AutoNation Inc. said profit dropped 35% to $40.6 million, or 10 cents a share, as it had warned last month, on higher costs as the company closes its used-vehicle stores. The auto retailer’s revenue rose 38% to $5.02 billion from $3.64 billion. Before AutoNation’s profit warning, analysts had expected earnings of 19 cents.

* Avis Rent a Car Inc.’s fourth-quarter earnings soared to $10.7 million, or 20 cents a share, from $3.63 million, or 11 cents, much better than the 13 cents analysts expected, as revenue rose 4.7% to $1 billion from $962.

* Ben & Jerry’s Homemade Inc. said its earnings rose to $1 million, or 14 cents a share, 3 cents better than estimates, from $840 million, or 11 cents a share, a year ago, as sales rose 17% to $51.68 million. The latest results exclude a restructuring charge for eliminating the production of novelty products. The ice cream company plans to hire an outside company to produce its novelty items. Ben & Jerry’s repeated its December announcement that it had received “indications of interest” to acquire the company, but gave no clue how it might respond.

* General Dynamics Corp. said fourth-quarter profit rose 24% to $198 million, or 98 cents a share, exceeding estimates of 95 cents, as its telecommunications business expanded and it sold more corporate jets. General Dynamics went on a buying spree last year, acquiring businesses whose sales are increasing faster than those of its tanks, destroyers and submarines.

* Merck & Co. said fourth-quarter profit rose 12% to $1.57 billion, or 66 cents a share, matching the average estimate of analysts, as new drugs such as the painkiller Vioxx helped boost sales for the No. 1 U.S. drug maker. Revenue grew 19% to $8.96 billion, with a 15% increase in sales of Merck’s biggest drug, the cholesterol reducer Zocor, to $1.28 billion. Merck is counting on Vioxx and five other drugs introduced since 1998 to make up for medicines losing patent protection and facing generic competition within a few years. Vioxx, introduced last year, had $264 million in sales in the quarter as U.S. prescriptions topped 5 million.

* McDonald’s Corp. said profit jumped 40% in the fourth quarter to $486.2 million, or 35 cents a share, a penny less than analysts expected, and warned that higher labor costs and slow economies in Brazil and Japan may crimp operating margins this year. Revenue, which includes sales from company-owned stores and franchise fees, rose 4.7% to $3.37 billion.

McDonald’s said that it hopes to lower costs this year by increasing the number of transactions it handles per labor hour, and that it will consider raising prices to relieve margin pressure. McDonald’s shares fell $4.06 to close at $35.75 on the New York Stock Exchange.

* Texaco Inc.’s earnings increased more than fourfold in the fourth quarter, but fell short of Wall Street expectations. Profit from operations rose to $370 million, or 67 cents a share, from $92 million, or 15 cents, a year ago on a 35% jump in revenue to $10.6 billion. Analysts surveyed by First Call/Thomson Financial had expected earnings of 68 cents. Texaco Chief Executive Peter I. Bijur said that although the company benefited significantly from soaring crude oil prices, it couldn’t raise prices for its refined products in line with the increases in crude. As a result, earnings from oil and gas exploration and production rose strongly, and those from refining and marketing were lackluster.

* US West Inc. said fourth-quarter profit grew 7.1% to $425 million, or 83 cents a share, beating the average estimate of 78 cents, buoyed by strong sales of wireless telephone service and high-speed Internet connections. The results exclude a loss of $259 million, or 51 cents a share, from the sale of about 24 million Global Crossing Ltd. shares.

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Associated Press was used in compiling this report.