Earnings: Southwest Down(!), Google Up
We can all agree that it qualifies as news: For the first quarter in 17 years -- 17 years -- Southwest Airlines reported a quarterly loss today.
The reason: Southwest gambled and lost on its jet fuel hedge. (Brilliant Forbes headline: "Southwest Flies Into a Hedge.")
Southwest, the on-time sector darling and model of efficiency, hedged its fuel bets, meaning it assumed fuel prices were going to continue rising like they did this summer. But when rapidly falling oil prices dipped below the futures amount Southwest paid, the company suddenly found itself overpaying for jet fuel.
Such is the nature of futures.
If you back out the $247 million charge Southwest had to record for its bad bet on hedges, the airline actually recorded a slight profit for the quarter.
Speaking of profits, they were up at Google during the third quarter, compared with the same period last year.
The search ad giant released its earnings just after the markets closed today, and they beat analyst expectations.
This is good news for Google, which has watched its value drop by half over the past year. Shares of Google closed at $353.02 today; in early November last year, Google peaked at $732.94.
Further, the unrivaled online ad titan could face a tough 2009. Ad revenue forecasts for next year were already looking dim before the current financial crisis. What do businesses in contraction cut first? Advertising and marketing budgets.
-- Frank Ahrens
Posted by: Night Mayor | October 17, 2008 4:40 AM | Report abuse
Posted by: Night Mayor | October 17, 2008 4:56 AM | Report abuse
The comments to this entry are closed.