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GE warns on third quarter
Second-quarter earnings, revenue rise to meet views, but shares fall on 3Q guidance below forecast.
July 15, 2005: 9:40 AM EDT

NEW YORK (CNN/Money) - General Electric posted its best gain in earnings since late 2003 Friday, although it warned that current quarter results will fall short of forecasts.

Shares of GE (unchanged at $35.63, Research), one of the Dow 30 and the world's most valuable company, were lower at the market open Friday. Shares were initially higher in European trading on the earnings statement before the company released the third-quarter guidance about 8:30 a.m. ET.

The Fairfield, Conn.-based company reported net income of $4.65 billion, or 44 cents a share, up from $3.75 billion, or 38 cents, a year earlier. That was in line with the forecasts of analysts surveyed by earnings tracker First Call.

The 24 percent gain in profits from a year earlier was the biggest increase since GE profits jumped 47 percent in the fourth quarter of 2003.

But in the company's investor call, it said it is looking for third-quarter earnings of 43 to 44 cents a share. While that is up from 38 cents a year earlier, it was below the First Call consensus forecast of 45 cents.

Still, the company gave a better view of full-year earnings, saying it is now looking at earnings of $1.80 to $1.83 a share in 2005, which includes the First Call 2005 EPS forecast of $1.82. Its earlier guidance had called for full-year EPS of $1.78 to $1.83.

Revenue jumped 13 percent to $41.6 billion, which also met analysts' forecasts, according to First Call's survey.

GE makes jet engines, power systems, appliances and medical equipment, and it owns a huge financial services businesses as well as NBC Universal, which includes the NBC television network and a movie studio.

Its gains in the quarter were spread across its 11 business units, with each seeing increased revenue and income gains of at least 10 percent.

Commercial finance, its largest unit, posted a 25 percent gain in earnings, while insurance, its No. 2 unit in terms of revenue, saw income rise more than fivefold to $284 million from $53 million a year earlier.

The unit with the best improvement was equipment and other services, which posted earnings of $65 million, compared to a loss of $105 million a year earlier.

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