GE profit falls, meets estimates, sells loan unit
HARTFORD, Connecticut -- Industrial and financial conglomerate General Electric ge said Friday that its profit fell 6% in the second quarter and that it has agreed to sell its Japanese consumer finance business for $5.4 billion.
GE earned $5.07 billion, or 51 cents a share, compared with a year-earlier profit of $5.38 billion, or 52 cents a share.
Revenue rose to $46.89 billion from $42.38 billion a year earlier.
On the basis of continuing operations, GE said it earned $5.39 billion, or 54 cents a share. Thomson Financial says analysts expected the company to report earnings of 54 cents a share on revenue of $45.31 billion.
"We believe we had a solid performance in a tough environment," GE Chief Executive Jeff Immelt told analysts in a conference call Friday.
Growth internationally is "offsetting a sluggish U.S. economy" and GE's long-term positioning outside the United States has shown benefits in the second quarter, he said.
While its revenue rose 11%, costs from sales and expenses and interest and other financial charges rose 15%, slicing into the conglomerate's quarterly profit.
The earnings release Friday was a relief to investors who nervously awaited the results following first-quarter earnings reporting a nearly 6% decline in profits.
"No news is good news today, said analyst Matt Collins at Edward Jones in St. Louis. "I think investors were braced for the worst."
Analyst Nicholas Heymann of Sterne Agee said investors are feeling confident again about GE.
"Overall, I think people are getting to be less fearful about the perceived risks vs. the actual risks of the GE portfolio or how they run the business," he said.
GE said it had agreed to sell its Japanese consumer finance unit, which includes the Lake personal loan business, wholly owned credit cards and mortgages under GE Consumer Finance and its subsidiaries, to Shinsei Bank, a midsize Japanese bank. The sale is expected to close in the next quarter.
It's the most recent in a series of moves by GE to reshape its portfolio to focus on faster growth businesses. GE announced Thursday that it wants to spin off its lighting and appliance businesses, which are part of GE's industrial products business.
On Friday, that segment reported sharply lower profit of $300 million for the quarter, down 32% from the same period last year. Chief Financial Officer Keith Sherin cited the housing market's collapse and a run-up in commodity prices affecting appliances.
GE reaffirmed its full-year guidance of $2.20 to $2.30 a share, which is flat to an increase of 5%. Analysts surveyed by Thomson Financial expect full-year earnings of $2.22.
GE's infrastructure business, which manufactures big-ticket items such as locomotives and water treatment plants and is making major inroads in developing countries, turned in the greatest revenue and profit gains for the second quarter. Revenue for the quarter was $17.5 billion, up 26%. Profit rose 24%, to $3.17 billion.
Profit at GE Money fell 9%, to $1.05 billion. GE Money provides retail, banking and credit services to consumers, retailers and auto dealers in 55 countries.
GE shocked investors with its first-quarter earnings April 11 that reported a nearly 6% decline in its profit and slashed its earnings forecast for the year. Its shares dropped 10% and the broader market also was sharply lower on worries about the weakening economy.
GE blamed disruptions in its financial business late in the first quarter for its inability to advise Wall Street in advance about the deterioration in its earnings.