GE profit falls 49%, tops expectations
— -- General Electric said Friday its ' second-quarter profit tumbled 49% as the recession continued to hurt its finance unit and lowered sales across its wide range of industrial businesses.
The conglomerate's earnings edged past Wall Street expectations and GE said its big capital lending unit is on track to post a profit this year. But revenue came up short.
Investors are combing corporate earnings for clues on the direction of the nation's moribund economy and GE, which lends money and makes products ranging from microwaves to wind turbines, is considered a barometer of its health. The company's results suggest the recession is still sapping demand for goods.
GE reported net income was $2.6 billion, or 24 cents a share, after paying preferred dividends. That compared with $5.1 billion, or 51 cents a share, a year earlier.
Revenue fell 17% to $39.1 billion.
Analysts polled by Thomson Reuters expected the company to earn 23 cents a share on revenue of $42.16 billion.
GE Capital, which lends money on everything from credit cards to commercial real estate, posted a modest profit of $590 million. But those results were still 80% lower than a year ago, further proof of GE Capital's struggles with mounting losses on its bad loans during the financial crisis.
Still, GE Capital "remains on track to be profitable for the full year," Jeff Immelt, GE's chief executive, said.
GE is in the process of shrinking GE Capital and reducing its reliance on riskier debt like commercial paper. But its earnings show that the unit continues to face serious challenges. For example, GE's real estate unit, which owns office buildings and makes loans for commercial properties, posted a $237 million loss compared with $484 million in profits a year earlier.
GE's industrial units have also suffered. GE said its second-quarter sales fell 7% to $26 billion, a decline led by home appliances, train locomotives and diagnostic equipment for hospitals.
The conglomerate's NBC Universal entertainment division, which includes the NBC television networks, saw profits fall 41% on weak television advertising.
The only unit to post higher profits was GE's energy infrastructure segment, which makes products like pipeline equipment and wind turbines. GE said the 13% increase there was due to pricing and cost moves.
The first half of 2009 has been a difficult one for GE, one of the world's largest companies. It cut its dividend sharply to preserve cash, lost its vaunted Triple-A credit rating because of GE Capital's problems, and saw its share price plummet on fears that things could get worse for its lending unit.
Despite GE's problems, company officials say there have been some signs of stability recently. GE has already met its goal of raising $45 billion from debt sales this year and pre-funded a third of its planned debt issuance for next year. That's an indication that credit markets may be regaining some of their vigor. GE's share prices have also recovered.
The company has been fending off speculation about the impact of President Obama's financial sector proposal. The proposals could give regulators more sway over GE Capital and potentially GE as a whole. That could force GE to spin off GE Capital, though GE has said it remains committed to the finance unit.
GE plans to give a detailed review of GE Capital later this month, the second time this year it will open its books as it tries to convince investors that there are no big losses lurking.