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Stocks to watch Tuesday
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November 15, 1999: 7:05 p.m. ET
Lycos seeks out a profit while Revlon can't quite make up for heavy losses
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NEW YORK (CNNfn) - Lycos Inc. managed to meet Wall Street's quarterly profit expectations after the markets closed Monday, but Revlon Inc. fell well short despite analysts having already revised their estimates sharply downward following an earnings warning last month.
Lycos Inc.
Lycos Inc. more than doubled revenues during its fiscal first quarter on its way to matching Wall Street's earnings expectations of 1 cent per share.
The Waltham, Mass.-based Internet portal said it earned $714,000 for the three-month period ended Oct. 31 excluding amortization of intangible assets, compared to the $2.58 million it lost a year earlier.
Including amortization, Lycos actually lost $28.7 million, or 29 cents per share, compared to the $15.6 million, or 4 cents per share it lost during the same period last year.
Revenue increased 126 percent for the quarter to $56 million as the company used a number of new alliances to drive new traffic to its site.
Much of the revenue growth came from advertising sales, which more than doubled $39 million.
Lycos' stock shot up in after-hours trading following its earnings announcement, rising 3-1/8 to 63.
Revlon Inc.
Revlon Inc. (REV) reported third-quarter earnings even lower than analysts' revised expectations and said it now expects to sell its Professional Products business and non-core Latin American brands by the first quarter of next year.
The New York-based skin care and fragrance company also said it has successfully amended Revlon's credit agreement with its lenders. The company opened negotiations on possible amendments last month when it warned of a massive third-quarter loss.
Revlon did indeed report a $121.1 million, or $3.21 cents per diluted share, loss before restructuring charges for the quarter ended Sept. 30. That compared to $47 million, or 24 cents a share, gain a year earlier and was 6 cents lower than the $3.15 per share loss analysts surveyed by First Call expected.
Revenue for the quarter fell 17.5 percent to $452.4 million as the company reduced its shipments to lower retailers' inventory levels. That reduction was more profound in the United States, where sales dropped to $250 million from $334.3 million last year, than internationally, where sales fell to $202.4 million from $214.3 million.
For the year so far, Revlon has lost $86.8 million, or $3.96 per diluted share, on revenues of $1.45 billion. That compares to the $127 million, or 17 cents per share, it earned during the same period last year on sales of $1.62 billion.
Revlon officials said Monday the company now believes its year-end operating loss will be worse than the $70 million to $80 million it originally projected.
Forest Laboratories Inc.
Forest Laboratories Inc. (FRX) said it was discussing a "contract settlement" with fellow drug maker Warner-Lambert that would allow it to exclusively promote the Celexa antidepressant drug.
The New York-based pharmaceutical company currently co-promotes Celexa with Warner-Lambert under a contract that runs until 2001. But Forest officials said they believe certain contractual provisions should allow Forest to terminate that agreement given Warner-Lambert's proposed merger deal with American Home Products (AHP).
"We are discussing with Warner-Lambert a contract settlement, pursuant to contract provisions that we believe will allow us to terminate the agreement, which is expected to result in a phase-out of Warner-Lambert's co-promotion efforts over a period during which Forest will expand its own sales force," the company said in a statement.
Forest said it already had been ramping up its own sales force in anticipation of taking over Warner-Lambert's role before the AHP merger agreement was announced. The company said it expects no interruption of the marketing efforts even if that phase-out is accelerated.
The news came the same day Warner-Lambert (WLA) said it might scrap a co-marketing deal for its blockbuster heart drug Lipitor with Pfizer Inc. (PFE) in an effort to stave off a possible hostile takeover bid from Pfizer.
AMR Corp.
AMR Corp. (AMR) subsidiary American Airlines and British Airways said they were renewing their efforts to develop a global marketing alliance, albeit on a much smaller scale.
The two airlines said they would seek approval to codeshare on a variety of routes from the U.S. Department of Transportation under the existing U.S.-U.K. aviation agreement known as Bermuda 2.
Those codesharing designation would essentially allow American Airlines and British Airlines to market and fly to a limited number of routes beyond gateways they currently utilize by using the other airlines designator code.
"It opens up about 60 or 70 points on the other side of the Atlantic that we can't fly into with our own metal right now," said an American Airlines spokesman.
The proposal would allow American to fly into such U.K. cities as Birmingham, Glasgow and Manchester, as well as more than 40 points in the U.K., the rest of Europe and Africa currently served by British Airways connecting flights.
The Transportation Department rejected a full-blown alliance between the two airlines in late July because of anti-trust concerns. The airlines hope to gain approval for the scaled-back alliance in place by the beginning of the summer 2000 season.
Tuesday's outlook
All eyes will be on the Federal Reserve's Open Market Committee Tuesday, as the 12-member committee huddles behind closed doors to determine the future course of the nation's monetary policy.
The FOMC will release its decision on whether it is raising, lowering or holding pat on short-term interest rates at 2:15 p.m.
The Federal Reserve is also due to report industrial production and capacity utilization figures for October at 9:15 a.m.
After industrial production dipped 0.3 percent during September, economists polled by Reuters are expecting October's figures to climb by the same amount. Capacity utilization is expected to hold steady at 80.3 percent.
Earnings reports will be lighter than in recent weeks, but among those companies schedule to release profit numbers Tuesday is Campbell Soup Co., which has fallen on hard times of late. Campbell (CPB) is expected to have earned 49 cents per share during its fiscal first quarter, down from the 58 cents per share it earned a year earlier.
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A bevy of retailers are also slated to report earnings tomorrow, including Home Depot Inc. (HD), J.C. Penney Co. (JCP), Staples (SPLS), Saks Inc. (SKS), The Limited (LTD) and Anne Taylor Stores Inc. (ANN).
Among the new issues expected to start trading tomorrow will be communications software developer Quintus, which priced 4.5 million shares at $18 per share, well above its expected range of $12 to $14 per share. Quintus will trade under the symbol "QNTS."
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