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GE Profit Falls 44%, Looks to Keep Dividend, Rating
Topics:Stock Market | Earnings
By: Reuters | 23 Jan 2009 | 09:19 AM ET
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General Electric reported a 44 percent drop in quarterly profit on weakness at GE Capital and its lighting and appliance units, as the U.S. conglomerate and economic bellwether closed out one of the toughest years in its 117-year history.
AP
Despite meeting Wall Street's lowered estimates, earnings at the company's GE Capital finance arm -- its Achilles heel for the past year -- tumbled 67 percent. Its energy infrastructure unit, which makes electric turbines and windmills, was the highlight, recording 11 percent profit growth.
Although Chief Executive Jeff Immelt said in a statement that he expects the rest of the year to be "extremely difficult," he later told CNBC, "We're not going to apologize for the results that we have in the fourth quarter."
CNBC and CNBC.com are owned by GE.
"We delivered on what we said we're going to do in December," Immelt said. "Our cash was very strong and our liquidity was very strong at the end of the year." (To listen to the full interview, click here.)
The world's largest maker of jet engines and electric turbines said profit was $3.72 billion, or 35 cents per diluted share, compared with $6.7 billion, or 66 cents, a year earlier.
Factoring out one-time items, results met Wall Street's expectations, according to Reuters Estimates.
Revenue fell 4.8 percent to $46.21 billion.
But analysts and investors noted that given the brutal economic environment, GE may still have major challenges ahead.
"We believe (GE Capital) losses and growing strain on Industrial are shoes yet to drop," wrote J.P. Morgan analyst Steve Tusa, in a note to clients. He added that concerns about its Triple-A credit rating and its dividend will also pressure the stock.
GE shares fell 5.3 percent to $12.77 in pre-market trading, down from a $13.48 close on the New York Stock Exchange.
Affirms Dividend, Outlook
The global financial crisis has pounded results at GE Capital, leading many on Wall Street to wonder if it could lose its coveted triple-A debt rating.
RELATED LINKS
GE's Credit Rating, Dividend Are at Risk
GE Faces Crucial Questions in 2009
GE Capital to Slash Up to 11,000 Jobs
Complete Earnings Coverage
Immelt said the company stands by its 2009 earnings framework laid out in December, that it is committed to pay a full-year dividend of $1.24 per share and that he will continue to run it to keep its top-shelf AAA credit rating.
"We run the company to be a triple-A, we've always had, and we believe in a strong dividend," Immelt told "Squawk Box."
During the interview, Immelt said he understands the concerns investors have, but he thinks that maintaining the dividend is the right thing to do for investors.
"What we've done here, I think, should let investors know that we've got the cash and the operating model that's going to secure the dividend in this difficult environment," he said.
GE [GE 13.48 --- UNCH ] has ceased providing numeric per-share profit targets, instead opting to spell out a rough "framework" for how its individual businesses will perform. That calls for profit at its infrastructure units and at NBC Universal to be flat to up 5 percent, with GE Capital profit down about 40 percent.
"There's been a lot of declining consensus earnings of late, and I think that's basically a sign of the uncertainty as to their outlook for their global economy," said Perry Adams, senior portfolio manager at Huntington Private Financial Group in Traverse City, Michigan.
"Maybe they've underestimated the weakness of it," he added. "That's going to be the key going forward here."
Across the industrial sector, companies are braced for a rough year. United Technologies Corp, the world's largest maker of elevators and air conditioners, on Wednesday warned that it expected a particularly brutal first half.
GE, which stunned investors in April with an unexpected profit drop, has said it would cut jobs across its operations this year, but has not given an overall target for reductions, saying those decisions would be made at individual business units. GE employs more than 300,000 people worldwide.
The Fairfield, Connecticut company is trimming back its finance arm, which accounted for about half of its profits in 2007. The company aims to rely on GE Capital for just 30 percent of its profits, with 10 percent coming from NBC Universal and 60 percent from its core industrial units.
In early December, the company sharply lowered the high end of its fourth-quarter profit forecast.
Last year, GE explored a number of restructuring ideas, including trying to sell its U.S. private-label credit-card operation and looking to sell or spin off its century-old lighting and appliance business. Both those efforts were mothballed as the credit crunch made it all but impossible to pull off multibillion-dollar deals.
As of Thursday's close, GE shares have tumbled about 60 percent over the past year, erasing some $200 billion in market capital, and sharply outpacing the roughly 32 percent fall of the Dow Jones industrial average.
Immelt said he was confident in the company's ability to weather the crisis.
Topics:Stock Market | Earnings
By: Reuters | 23 Jan 2009 | 09:19 AM ET
Text Size
General Electric reported a 44 percent drop in quarterly profit on weakness at GE Capital and its lighting and appliance units, as the U.S. conglomerate and economic bellwether closed out one of the toughest years in its 117-year history.
AP
Despite meeting Wall Street's lowered estimates, earnings at the company's GE Capital finance arm -- its Achilles heel for the past year -- tumbled 67 percent. Its energy infrastructure unit, which makes electric turbines and windmills, was the highlight, recording 11 percent profit growth.
Although Chief Executive Jeff Immelt said in a statement that he expects the rest of the year to be "extremely difficult," he later told CNBC, "We're not going to apologize for the results that we have in the fourth quarter."
CNBC and CNBC.com are owned by GE.
"We delivered on what we said we're going to do in December," Immelt said. "Our cash was very strong and our liquidity was very strong at the end of the year." (To listen to the full interview, click here.)
The world's largest maker of jet engines and electric turbines said profit was $3.72 billion, or 35 cents per diluted share, compared with $6.7 billion, or 66 cents, a year earlier.
Factoring out one-time items, results met Wall Street's expectations, according to Reuters Estimates.
Revenue fell 4.8 percent to $46.21 billion.
But analysts and investors noted that given the brutal economic environment, GE may still have major challenges ahead.
"We believe (GE Capital) losses and growing strain on Industrial are shoes yet to drop," wrote J.P. Morgan analyst Steve Tusa, in a note to clients. He added that concerns about its Triple-A credit rating and its dividend will also pressure the stock.
GE shares fell 5.3 percent to $12.77 in pre-market trading, down from a $13.48 close on the New York Stock Exchange.
Affirms Dividend, Outlook
The global financial crisis has pounded results at GE Capital, leading many on Wall Street to wonder if it could lose its coveted triple-A debt rating.
RELATED LINKS
GE's Credit Rating, Dividend Are at Risk
GE Faces Crucial Questions in 2009
GE Capital to Slash Up to 11,000 Jobs
Complete Earnings Coverage
Immelt said the company stands by its 2009 earnings framework laid out in December, that it is committed to pay a full-year dividend of $1.24 per share and that he will continue to run it to keep its top-shelf AAA credit rating.
"We run the company to be a triple-A, we've always had, and we believe in a strong dividend," Immelt told "Squawk Box."
During the interview, Immelt said he understands the concerns investors have, but he thinks that maintaining the dividend is the right thing to do for investors.
"What we've done here, I think, should let investors know that we've got the cash and the operating model that's going to secure the dividend in this difficult environment," he said.
GE [GE 13.48 --- UNCH ] has ceased providing numeric per-share profit targets, instead opting to spell out a rough "framework" for how its individual businesses will perform. That calls for profit at its infrastructure units and at NBC Universal to be flat to up 5 percent, with GE Capital profit down about 40 percent.
"There's been a lot of declining consensus earnings of late, and I think that's basically a sign of the uncertainty as to their outlook for their global economy," said Perry Adams, senior portfolio manager at Huntington Private Financial Group in Traverse City, Michigan.
"Maybe they've underestimated the weakness of it," he added. "That's going to be the key going forward here."
Across the industrial sector, companies are braced for a rough year. United Technologies Corp, the world's largest maker of elevators and air conditioners, on Wednesday warned that it expected a particularly brutal first half.
GE, which stunned investors in April with an unexpected profit drop, has said it would cut jobs across its operations this year, but has not given an overall target for reductions, saying those decisions would be made at individual business units. GE employs more than 300,000 people worldwide.
The Fairfield, Connecticut company is trimming back its finance arm, which accounted for about half of its profits in 2007. The company aims to rely on GE Capital for just 30 percent of its profits, with 10 percent coming from NBC Universal and 60 percent from its core industrial units.
In early December, the company sharply lowered the high end of its fourth-quarter profit forecast.
Last year, GE explored a number of restructuring ideas, including trying to sell its U.S. private-label credit-card operation and looking to sell or spin off its century-old lighting and appliance business. Both those efforts were mothballed as the credit crunch made it all but impossible to pull off multibillion-dollar deals.
As of Thursday's close, GE shares have tumbled about 60 percent over the past year, erasing some $200 billion in market capital, and sharply outpacing the roughly 32 percent fall of the Dow Jones industrial average.
Immelt said he was confident in the company's ability to weather the crisis.