Company WatchANALYSIS OF BREAKING NEWS | General Electric (GE) |  - Co. Watch is available via RSS feed
| Reflecting the Times
| 
|
April 11, 2008 - General Electric Co. (GE-NYSE) announced an earnings surprise, a negative one. First quarter profits were down 6% compared to the same quarter last year. Even though revenues were up 8% to $42.4 billion, earnings took a hit, coming in at $4.3 billion or 43 cents a share. Counting only continuing operations (leaving out extraordinary charges), GE reported 44 cents a share, well shy of the 51 cents a share predicted by the consensus of analysts following the major conglomerate. The stock got pummeled, down more than 10% initially. Investors were disappointed.
But why? Certainly all investors are aware of the economic slowdown we're seeing. GE is a major force in the U.S. economy, one of the great bellwether stocks. It's in almost every type of business imaginable. One of those is the financial sector, including mortgages. And that's where the problems were. The company was trying to sell some of those and couldn't. Plus, it had to "mark to market", that is price all of its assets at market value. Many of those assets have gone way down since acquired by GE. But it wasn't all bad news.
"Demand for our global infrastructure business remained strong, but our financial-services businesses were challenged by a slowing U.S. economy and difficult capital markets," said Chairman and CEO Jeff Immelt in a statement. Subsequently, on CNBC, he added that not all of the blame was due to the economy, part had to go to the company's execution of its business plan. However, 2 of its finance related businesses, GE Money and commercial finance saw significant drops in earnings. GE Money was down 19% and the finance unit was down 20%. Compounding the negative news was an earnings shortfall in health care and industrial. On the bright side, infrastructure profit was up 17% and NBC Universal had an increase of 3%. Backlog was also higher, going up 41% in the equipment sector, to $52 billion.
GE lowered its 2008 profit forecast, putting it in a range of $2.20 to $2.30, suggesting second quarter profit in a range of 53 cents to 55 cents a share. Analysts thought the year would bring $2.43 and second quarter would show 58 cents a share. From management's forecast, earnings will either be flat or up 5% for the year when compared to 2007.
GE is a closely watched behemoth. With a broad diversity of businesses, it makes for a good gauge on the economy. Right now the gauge isn't reading too well.
Company Web site: www.ge.com
- Ted Allrich
|
Weekly Newsletter
printer-friendly format