GE meets lowered forecasts

The conglomerate announces a 22% drop in earnings and an 11% gain in revenue, reaffirms outlook for 2008 and maintains dividend.

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By Aaron Smith, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- General Electric on Friday reported a drop in third-quarter earnings that met expectations and a gain in revenue that was close to expectations.

General Electric (GE, Fortune 500), a market bellwether with industrial, financial and media divisions, reported a 22% drop in net income to $4.3 billion. Earnings from continuing operations fell 10% to 45 cents per share while revenues grew 11% to $47.2 billion.

Analysts were expecting a profit from continuing operations of 45 cents per share and sales of $47.3 billion, according to Thomson Reuters.

"The good news is that they made their numbers, and that to me was critical," said James Hardesty, president of Hardesty Capital Management, which counts GE as its biggest holding with more than 600,000 shares.

On September 25, GE publicly lowered its forecast for the third quarter: It said to expect a range of earnings of between 43 cents and 48 cents, down from the prior guidance of 50 cents to 54 cents per share.

At that time, GE said the biggest drag on its profits would be its GE Capital Finance division, which includes insurance and credit cards, as well as commercial, home and personal loans.

GE confirmed that Friday, reporting that profits from GE Capital were $2 billion, in line with its reduced forecasts and down 33% from a year ago.

The implosion of the housing market is largely to blame, the company said.

Keith Sherin, GE's chief financial officer, said the company is downsizing its real estate portfolio and will continue to do so through 2009. He also said the company has been experiencing delinquencies and is "going to put in loss provisions" to buffer against them.

But the company said the declines in its finance division were almost offset by 31% profit growth in its energy infrastructure division, to $1.4 billion, with increases related to oil and gas, as well as wind power.

The company also said its media division posted a healthy increase in profits, with its NBC network benefiting from the Olympics.

The company reiterated that it expects to meet its new full-year earnings guidance for 2008 and will maintain its dividend through 2009. But GE did not offer guidance for 2009.

GE lowered its full-year 2008 earnings forecast to a range of $1.95 to $2.10 per share from the prior range of $2.20 to $2.30 in late September. Analysts now expect GE to report a full-year profit of $1.99 a share.

The company also said it was maintaining its annual dividend of $1.24 per share through 2009.

"We have continued to take decisive steps to strengthen GE in a tough environment," said GE chief executive officer Jeff Immelt in a statement.

Shares of GE fell 8% Thursday, in sympathy with the broader market. But the stock was up more than 4% Friday morning even as stocks in the U.S. fell again in a wild start to trading.

Peter Cardillo, analyst for Avalon Partners, said that even though GE met its recently-lowered expectations, that would probably not help the overall stock market Friday.

"In this type of market, even good news is being perceived as negative," said Cardillo. To top of page

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