GE earnings dim by 47%

Conglomerate's profit comes in at low end of its expectations. Immelt expects to maintain 2009 dividend.

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By Catherine Clifford, staff writer


NEW YORK ( -- General Electric Co. on Friday reported a 47% decline in fourth-quarter earnings per share that was at the low end of its expectations, and lower revenue that was below analysts' forecasts.

Shares of GE fell more than 4% in NYSE trading.

GE (GE, Fortune 500) reported earnings from continuing operations of 36 cents per share attributable to common shareholders, including a one-time restructuring charge of $1.5 billion. The conglomerate earned 37 cents per share in the fourth quarter before preferred dividends.

A year earlier, the company posted earnings from continuing operations of 68 cents per share.

Including the restructuring charges, analysts were expecting earnings per share of 37 cents. The company announced in December that it expected to earn between 36 and 42 cents per share including the charge.

Net income, after taking discontinued operations into account, fell 44% to $3.7 billion from $6.7 billion a year earlier.

"In a very tough environment, we delivered fourth-quarter business results in line with expectations we provided in December," Chairman and CEO Jeff Immelt said in a written statement.

GE posted sales of $46.2 billion for the quarter, down 5% from the fourth quarter of 2007. That was less than the $50.1 billion that analysts were expecting.

The company's strongest sector in the quarter was energy, including its power generation equipment, which posted an 11% growth in profit on the back of a 21% growth in sales.

But the capital finance division's revenue declined 17% in the quarter and profit fell by 67%. The consumer and industrial sector had a 17% revenue decline and an 86% drop in profit.

The company also said it remains committed to providing the annual dividend of $1.24 per share.

"The first quarter dividend is done, and we are committed to our plan for $1.24 per share for the year," said Immelt in the statement. "We believe the GE dividend provides our investors with a solid return in this uncertain time."

On a conference call with analysts, Immelt said GE could afford to pay a dividend to its investors.

"We are not straining to pay it," said Immelt. "It has just been the judgment that this has been the most investor friendly use of this capital."

One analyst said the promise to maintain the dividend will be tough to keep.

"They will need a little luck in terms of what the credit cycle does," said Christopher Glynn, executive director of Oppenheimer. "I don't know how things are going to unfold, but it doesn't strike me as conservative."

Analysts have questioned whether the company will be able to continue to pay out an annual dividend and still maintain its perfect credit rating, but the company said it was committed to doing both.

"We run the company to have a Triple-A credit rating, and we have significantly strengthened our liquidity position," Immelt said. He said GE has been able to fund $29 billion of its $45 billion long-term debt needs for 2009.

Immelt also said, however, that the coming year was going to be rough. "We expect 2009 to be extremely difficult," he said in the statement.

GE's finance arm, GE Capital, earned $1 billion in the fourth quarter and a total of $8.6 billion for the full year.

The unit has taken a hit since the U.S. economy went into recession in December 2007 as pipelines of credit dried up. The finance arm of the conglomerate offers insurance coverage, credit cards, and commercial and personal loans.

In the company's December outlook, GE said it expects the financial services arm to earn $5 billion in 2009. Immelt maintained this outlook in the fourth quarter earnings announcement - something that may require a little luck.

"Their bridge to the '09 performance for the financial side is tenuous in places," said Glynn. "It seems to be a little optimistic on the assumptions of credit losses, but we are not anticipating major book value impairments," or writedowns.

Chief Financial Officer Keith Sherin said in the conference call that GE would narrow the focus of the financial services arm.

"We are repositioning GE Capital," he said. "We are changing where we are going to be - smaller, more focused, refinance company."

Sherin said the finance arm has seen the greatest weakness in its U.S. consumer and U.K. mortgage businesses. He said that the global financial meltdown had resulted in "a tougher loss environment that we were planning for in December."

For all of 2008, earnings from continuing operations were $18.1 billion, or $1.78 a share, down 19% from $22.5 billion, or $2.20 a share in 2007. sales rose 6% to $183 billion. To top of page

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