Posted on: Tuesday, October 22, 2002
Cendant's net income up 19% in 3rd quarter
Associated Press
NEW YORK — Travel and real estate conglomerate Cendant Corp. said yesterday that net income increased by 19 percent during the third quarter because of the strength of its car rental and residential real estate businesses.
The New York-based company also said it would "curtail acquisition activity" and use its cash flow to reduce debt and buy back $200 million in stock.
The company's third-quarter results were in line with Wall Street's expectations, which were recently lowered after the New York-based company reduced its forecast by 33 percent because of the impact of low interest rates on its mortgage-servicing business.
Cendant, the owner of Honolulu-based Cheap Tickets, reported net income of $250 million, or 24 cents per share, during the July-September period, compared with $210 million, or 23 cents per share, a year earlier.
Excluding one-time costs, Cendant reported operating profit of 28 cents per share, which was in line with the expectations of analysts surveyed by Thomson First Call.
Revenue for the period increased to $3.8 billion, compared with $2.4 billion a year ago.
Cendant said year-on-year revenue was helped by the October 2001 acquisitions of computerized reservation service Galileo International Inc. and online travel company Cheap Tickets. The company also said it benefited from higher rental car rates and increased transaction volume at its real estate franchise businesses.
Cendant's real estate business is made up of franchised brokerages such as Century 21 and Coldwell Banker, whose services include lending and refinancing.
Its car rental business is made up of the Avis and Budget brands.
"Our business segments performed at or ahead of our expectations this quarter, despite a challenging environment for commercial travel and corporate spending," said Henry R. Silverman, Cendant chairman and chief executive.
For the first nine months of the year, the company reported net income of $599 million, compared with $692 million a year earlier. Revenue in the January-September period was $10.2 billion, compared with $6.1 billion in 2001.
Cendant also affirmed its fourth quarter operating earnings forecast of 29 cents per share and full-year operating earnings of $1.26 per share.
The company announced on Sept. 25 that operating profit would decline by $175 million, or 17 cents per share, in the July-September period because of an "unprecedented" level of mortgage prepayments and refinancings.
Explaining the writedown of its mortgage-servicing business last month, Cendant's chief financial officer, Kevin M. Sheehan, said the economic models the company had been using to estimate future earnings in its mortgage business were "not as effective" with interest rates at 41-year lows.
Shares of Cendant rose 77 cents to close at $12.27 on the New York Stock Exchange. The company released its earnings after markets closed and scheduled a conference call for investors today.
