At $2.5 Billion, G.E.’s Quarterly Profit Hints at Stability/GE profits fall 47% as revenue slumps

At $2.5 Billion, G.E.’s Quarterly Profit Hints at Stability
By STEVE LOHR
Copyright by The New York Times
Published: October 16, 2009
http://www.nytimes.com/2009/10/17/business/17electric.html?hpw


General Electric reported a third-quarter profit Friday that slightly exceeded Wall Street’s expectations amid signs that orders for its industrial businesses are improving.

The company’s big finance arm, GE Capital, continues to struggle, particularly with losses on commercial property and home mortgage loans in Europe that have soured during the global economic downturn. But even G.E.’s finance business is starting to stabilize, company executives said.

Jeffrey R. Immelt, G.E.’s chief executive, described the company’s performance as “solid” in a “global economic environment that is beginning to slowly recover.”

G.E.’s quarterly profit fell 44 percent from a year earlier, to $2.5 billion, or 22 cents a share. The results were 2 cents above the analysts’ consensus estimate of 20 cents a share, as compiled by Thomson Reuters.

Revenue fell 20 percent to $37.8 billion. That was nearly $2 billion below Wall Street’s expectations, but G.E. executives said the decline was partly attributable to the planned shrinkage of its finance business.

Profit in the finance unit decreased 87 percent from the quarter a year ago as revenue declined to $12.3 billion from $17.3 billion.

Orders for G.E.’s industrial equipment, including jet engines, power plant turbines and medical-imaging equipment, fell 18 percent from the quarter a year ago.

But the rate of decline showed sharply from the second quarter, when industrial orders fell 25 percent. The $18.4 billion in industrial orders in the third quarter, which ended Sept. 30, was $500 million more than in the second quarter.

“That’s a big improvement and an encouraging sign,” said Steven E. Winoker, an analyst at Bernstein Research.

Analysts are closely monitoring G.E.’s quarter-by-quarter results for two things: evidence that its industrial business is reviving as the economy gradually recovers, and proof that the loan problems in the finance business are under control.

On both fronts, analysts said, G.E.’s third-quarter performance was generally reassuring.

During the downturn, the company has embarked on a cost-cutting program to conserve cash, and that effort is succeeding despite the decline in business. Indeed, cash generated from its industrial businesses in the first nine months rose 1 percent, to $11.5 billion.

The expense-trimming campaign is evident in the quarterly results in the industrial side of G.E.’s portfolio. For example, its energy infrastructure business, including turbines, equipment for the oil and gas industry, and modern windmills, reported an 11 percent rise in earnings to $1.6 billion, even though revenue fell 9 percent to $8.9 billion.

G.E.’s media business, NBC Universal, reported a 13 percent increase in profit, to $732 million, lifted by the sale of its Lifetime cable channel to A&E. Revenue at NBC Universal fell 20 percent, hurt by the weakness in advertising.

G.E. has been negotiating a possible sale of a majority stake in NBC Universal to Comcast, for $6 billion to $7 billion, according to people with knowledge of the talks.





GE profits fall 47% as revenue slumps
By Justin Baer in New York
Copyright The Financial Times Limited 2009
Published: October 16 2009 13:39 | Last updated: October 16 2009 13:39
http://www.ft.com/cms/s/0/b767bc8e-ba46-11de-9dd7-00144feab49a.html


General Electric’s quarterly earnings fell 47 per cent as revenue slumped and the company’s financial services arm remained mired in a brutal downturn.

The conglomerate, whose products range from gas turbines and aircraft engines to medical imaging equipment and credit cards, has responded to the recession by slashing expenses and shrinking GE Capital, the finance unit. The efforts have helped cushion GE from mounting credit losses and, in the third quarter, beat Wall Street’s expectations for earnings.

“In a global economic environment that is beginning to slowly recover, GE delivered solid third-quarter business results,” Jeff Immelt, GE’s chief executive, said in a statement on Friday.

“We continue to execute on our plan at Capital Finance, perform well in a slow-growth industrial environment and strengthen the balance sheet with strong cash generation.”

Earnings from continuing operations dropped to $2.5bn, or 22 cents a share, from $4.6bn, or 45 cents, a year earlier. Analysts had predicted earnings of 20 cents a share.

Total revenues dropped 20 per cent to $37.8bn, with all five of the Connecticut-based conglomerate’s operating units posting declines.

Energy Infrastructure, the power-generation equipment division, earned $1.6bn, an 11 per cent increase. Revenue slipped 9 per cent.

Technology infrastructure, which includes GE’s healthcare and aviation arms, reported operating profit of $1.7bn, down 8 per cent. Sales fell 11 per cent.

GE’s total backlog of industrial equipment orders climbed to a record $174bn.

GE Capital’s earnings tumbled 87 per cent to $263m, as the company continued to work through its plans to shrink both the unit’s loan portfolio and its borrowing needs. The division remains on track to reach GE’s goal for a profitable year.

NBC Universal, the media company GE is considering spinning off, reported a 13 per cent increase in profit. Revenue dropped 20 per cent.

Earnings from the Consumer & Industrial businesses such as appliances and light bulbs more than doubled, to $117m. Revenues dropped 18 per cent.

Shares of GE fell 3.51 per cent to $16.20 in pre-market trading.