That's despite seemingly strong revenue gains. Although overall sales rose 8% in the second quarter from the year before, BusinessWeek's flash profit survey of 90 bellwether companies shows that net income shriveled 34%. But on a closer look, sales weren't so hot either. Much of the jump stems from Enron Corp.'s 196% revenue gain. Barring that, overall sales were flat.DEPRESSED. Nor is the carnage over yet. First Call/Thomson Financial says earnings will drop 8% in the third quarter. Worse, recent earnings surprises have the Boston firm backing away from a projected 3.3% profit recovery in the fourth quarter. So far, 811 companies have warned of lower second-quarter earnings, up from 263 a year ago. "You don't switch from record earnings warnings to normal overnight," says Charles L. Hill, First Call's director of research.
Few sectors escaped the bloodbath. Tech companies continued to lead the downturn: Intel Corp.'s net dropped 94% on depressed demand for chips, while Motorola Inc.'s $759 million quarterly loss was one of the worst among the 90 companies. Carmakers and airlines didn't fare much better. General Motors Corp.'s (GM
) profits plunged 73% on weaker sales and losses from overseas units. "The strong dollar is becoming an increased problem in the marketplace," says GM CFO John Devine. Among carriers, UAL Corp. was one of the worst performers, posting a $292 million loss. Corporate travel cuts will force losses at most major carriers.
The financial services sector was a mixed bag. Citigroup's net rose 9%, to $3.7 billion, on higher global business growth. But venture capital investments in technology dealt Wells Fargo & Co. an $87 million loss.
There were few surprises among the quarter's star performers. Jack Welch will retire with his legacy as a master of strong and consistent earnings intact: General Electric Co. (GE
) earnings rose 15%, to $3.9 billion. Pharmaceuticals were also healthy. Pfizer Inc.'s net surged 56% to $1.8 billion, and Johnson & Johnson's climbed 9%, to $1.5 billion, on increased drug sales. Good thing. If the economy stays sick, we're all going to need plenty of painkillers. By Pallavi Gogoi in Chicago, with bureau reports