Dow Jones Online News, Tuesday, May 05, 1998 01:28
By Emily Nelson, Staff Reporter of The Wall Street Journal
Cendant Corp., which last month disclosed accounting problems at its
core membership business, posted slightly better-than-expected
first-quarter earnings of $230 million, or 26 cents a diluted share.
The marketing and franchising concern said the results were fueled by
cost cutting and increased revenue at its real-estate and travel
operations. Cendant said the earnings may be subject to slight revisions because of the continuing investigation of accounting problems. The membership business represents about 18% of Cendant's operations.
The results are scheduled to be released Tuesday. Monday, Cendant's stock closed at $25.50, up 81.25 cents, in New York Stock Exchange composite trading, the highest level since the accounting problems were disclosed April 15. Following that disclosure, Cendant's shares fell 46%.
The company didn't give results for last year. Because of the
accounting irregularities, it previously said its year-ago results
aren't reliable. It expects to reduce last year's reported results by
$100 million to $115 million, or 11% to 13%. According to its financial
filings, Cendant had 1997 first-quarter net income of $166 million, or
19 cents a diluted share. Year-ago results include earnings from both
CUC International Inc. and HFS Inc., which merged in December to form Cendant.
This year's net slightly beat analysts' expectations of 25 cents a
diluted share, according to First Call. Cendant said it had preliminary
first-quarter revenue of $1.44 billion. Its reported first-quarter
revenue for 1997 was $1.16 billion.
Cendant said the earnings reflect its strategy of buying several
companies in an industry, wringing out excess costs, and automating
their businesses. Cendant combined nine data centers into one and
increased the profit margin on its travel operations to 50% in the first
quarter from 43% the year earlier, said Cendant Chief Executive Henry R. Silverman. "I don't know any reason why we won't continue to grow at the same velocity," he said.
Cendant, of Stamford, Conn., and Parsippany, N.J., franchises hotels
including Ramada and Howard Johnson, real-estate brokerage firms and rental cars, and markets discount-membership clubs. A strong housing market also helped, said Mr. Silverman, who called the realestate business "the shining star." The brokerage business,
including Coldwell Banker and Century 21, contributed $29.5 million in
profit in the first quarter, up from $11.5 million in the 1997 quarter.
A few weeks ago, Cendant said it discovered accounting problems at
its membership division, the core of the old CUC. An audit committee of the company's board is investing the matter, and its report, expected later this month, will include the restated earnings.
But most of the company's operations aren't under investigation, Mr.
Silverman said. He said first-quarter profit from nonmembership
operations was $189 million, or 21 cents a diluted share, more than
double the year-earlier profit of $91 million, or 10 cents a diluted
share. Revenue for those operations was $700 million, up 35% from $520 million in the year-earlier period.
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I picked this up from the Yahoo board.
I assume it's from a valid news release, but I don't have a bona fide link at this time, so don't assume 100% that it is real as yet.
Yahoo is a crazy board w lots of jokes, but this sounds like the real McCoy.
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