GE reports unexpected 6% profit drop; stock pounded

HARTFORD, Conn. -- GE blamed disruptions in its financial business late in the quarter for its inability to advise Wall Street ahead of time about the deterioration in its earnings. But analysts unaccustomed to being surprised by the industrial, financial and media conglomerate were unnerved by the magnitude and breadth of the decline.

"Bottom-line: Disappointments were spread across the GE portfolio, with both industrial and financial businesses well below expectations," Goldman Sachs analyst Deane Dray wrote in a note to investors.

Just last month, Chief Executive Jeff Immelt had promised investors strong earnings despite the weakened U.S. economy, saying revenue and earnings would rise at least 10% this year.

"In 2008, we should hit all of our financial goals and outperform the S&P 500," he predicted in a message to investors in GE's annual report March 12.

But the company's financial services business fell 28%, driven by a 21% erosion in commercial finance due to lower real estate and other income. Net income fell 6% to $4.3 billion, or 43 cents per share, from a year ago. Earnings from continuing operations came to $4.4 billion, or 44 cents a share, down 8% year-over-year.

That was well below the 51 cents a share expected by analysts surveyed by Thomson Financial for profit from continuing operations. The company itself had forecast a profit of 50 to 53 a per share.

GE shares fell $4.70, or 12.8%, to $32.05.

The conglomerate said its strong international exposure — more than half its revenue is generated overseas — helped sustain its balance sheet as the U.S. economy slumps. But GE 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.