Apr 11, 2008 6:37 am US/Pacific
GE Posts Lower-Than-Expected 1Q Profit
HARTFORD, Conn.
General Electric Co. reported a smaller-than-expected first-quarter profit on Friday and lowered its outlook for the full year, sending its shares down more than 11 percent in premarket trading as a slowing U.S. economy sapped its financial services business.
GE, which also makes jet engines, railroad locomotives, water treatment plants and owns television network NBC, said net income fell 6 percent to $4.3 billion, or 43 cents per share, from $4.57 billion, or 44 cents per share, a year ago.
Earnings from continuing operations totaled $4.4 billion, or 44 cents per share, down 8 percent year-over-year.
Revenue climbed 8 percent to $42.24 billion from $39.20 billion, with global revenue up 22 percent.
Analysts surveyed by Thomson Financial expected profit from continuing operations would be 51 cents per share on revenue of $43.68 billion. The company had forecast profit of 50 to 53 cents per share.
Its shares fell $4.10, or 11.2 percent, to $32.65 in premarket trading. Stock futures broadly sagged after the report from a company which usually avoids surprising Wall Street.
GE said its strong international exposure - more than half of revenues are generated overseas - helped sustain the company's balance sheet as the U.S. economy continues to slump. But the company wasn't able to complete asset sales, due to tighter credit markets, and was forced to take hefty impairment charges which hurt earnings per share by 5 cents.
"The industrial earnings were up substantially, really led by infrastructure, which remains strong across the board, but the financial services environment was very difficult and became even more difficult late in the quarter," chief executive Jeff Immelt said in an analysts' conference call.
Immelt cited the near-collapse of the Wall Street investment firm Bear Stearns Cos. as a reason for the performance of GE's commercial business. Bear Stearns accepted a buyout offer from JPMorgan Chase & Co.
"We had planned for a difficult environment," he said. "We had planned for an environment that was going to be challenging, but what I would say is kind of late in the quarter, particularly after the Bear Stearns event, we experienced an extraordinary disruption in our ability to complete asset sales and incurred marks of impairments and this was something that we clearly didn't see until the end of the quarter."
GE said its commercial finance and GE Money businesses still earned $2.2 billion during the quarter, in what he characterized as a "trough market." NBC Universal grew profits 3 percent, while health care earnings were hurt by continued regulatory shipping restrictions on surgical supplies.
The company lowered its full-year outlook for earnings from continuing operations to between $2.20 and $2.30 per share, to account for an expected 5 percent to 10 percent decline in financial services profit. For the fiscal second quarter, GE forecast earnings per share of 53 cents to 55 cents.
"We believe that the strategy and the fundamentals of the company remain strong, but we felt like it was wise to revise guidance for the remainder of 2008 to reflect today's market realities," Immelt said.
GE had projected earnings from continuing operations of at least $2.42 a share in 2008. Analysts had predicted earnings from continuing operations of 58 cents for the second quarter and $2.43 for the full year.
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