Local Companies Hard Pressed To Keep Up in Profit Department
WALL STREET WEST
Some of L.A.’s largest companies will have a hard time keeping up with the strong earnings gains estimated for S & P; 500 companies in the just-ended third quarter.
For the three months ended Sept. 30, corporate profits nationwide rose at their fastest pace in three years, with energy, technology and financial services companies posting the strongest gains, according to Thomson Financial, which compiles analysts’ earnings forecasts. The projected 16 percent rise in earnings would be the best third-quarter performance since 2000, when S & P; 500 earnings rose 18 percent.
Higher productivity, further job cuts, increased consumer spending and easy comparisons with dismal profits in the year-ago quarter all contributed to a big improvement in the July-September period, according to Thomson Financial.
Occidental Petroleum Corp. is expected to report a 12.6 percent increase in third-quarter earnings per share, to 98 cents versus 87 cents in the year-ago quarter. The L.A.-based energy company is scheduled to report third-quarter earnings on Oct. 21.
At toy maker Mattel Inc., analysts tracked by Thomson Financial expect a 3.4 percent increase in earnings per share to 60 cents in the third quarter. Mattel is scheduled to report earnings on Oct. 16.
KB Home, one of the nation’s largest homebuilders, is expected to post a profit rise of 5.8 percent, to $3.09 a share, in its fourth quarter ending Nov. 30.
Earnings at energy utility Edison International are expected to fall to $1.05 a share in the third quarter from $1.08 in the year-ago period.
L.A.-based companies could benefit from an improving nationwide profit outlook in the fourth quarter. Thomson Financial expects fourth-quarter profits to jump 21.5 percent among S & P; 500 companies, with strength coming from financials, technology and basic materials stocks.
Kate Berry
Amgen Action
Heavy option trading could take the wind out of Amgen Inc. The Thousand Oaks-based drug maker has seen its shares, which closed at $66.28 on Oct. 1, jump 48 percent in the past year.
Brisk trading in Amgen put contracts last week, at a $65 strike price, mean that options players are skeptical the company can sustain its performance, according to Schaeffer’s Investment Research, which conducts technical analysis on stock trends. (The holder of a put option has the right to sell the stock to a counter party at a set price in the future; a call represents the right to buy at a set future price.) Schaeffer’s also noted that short selling of Amgen stock has been running at high volumes.
Schaeffer’s expects option-related resistance to impede the stock’s upward movement if it approaches the $70 a share level, but on the other hand, technical support will slow any decline below $65.
Kate Berry
Dealmakers
Boutique investment bank Kerlin Capital Group beat out three competitors to advise Covina-based Lereta Corp., a tax services and flood hazard determination company, in its sale last week for $210 million to title insurer LandAmerica Financial Group Inc., of Richmond, Va.
Veteran Los Angeles investment banker William Doyle formed six-person Kerlin in 1994. Lereta began looking for a strategic buyer in March. “We felt the price was just outstanding,” said Dale Quarto, Lereta’s chief executive.
Lereta will not have to lay off any of its 1,000 employees, including 700 in Los Angeles, because LandAmerica did not have Lereta’s products as a part of the bundled services it sells to the mortgage industry.
Kerlin also recently completed a $75 million private placement for Aecom Technology Corp., an employee-owned engineering services firm in Los Angeles with $2 billion in sales. Aecom aborted an initial public offering in 2002. JPMorgan Partners and Weston Presidio Capital, a private equity firm in San Francisco, made the private placement.
Kate Berry
