GE earnings down, but better than expected

Diversified manufacturer, media and finance giant sees bigger drop in revenue than expected, but lower earnings top forecasts

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Chris Isidore, senior writer

Are homes affordable where you live?
  • Yes, thanks to the housing bust.
  • Yes, always have been.
  • No, they're still too pricey.

NEW YORK ( -- General Electric Co. reported sharply lower second-quarter earnings Friday that still beat Wall Street expectations, even as its revenue fell more sharply than forecasts.

Shares of GE (GE, Fortune 500), a component of the Dow Jones industrial average, were down about 5% in early trading.

The company earned $2.9 billion, or 26 cents a share, in the quarter, down 47% from the $5.4 billion, or 54 cents a share it earned in the year-earlier period. Analysts surveyed by earnings tracker Thomson Reuters had forecast earnings of 23 cents a share in the period.

While earnings topped forecasts, overall revenue at the company fell 17% to $39.1 billion from $46.8 billion a year earlier. Analysts had expected revenue to drop to $42.2 billion.

The drops in revenue and earnings were widespread across GE, with its capital finance unit reporting the largest decline -- a 29% drop in revenue and an 80% plunge in earnings.

Most of the company's other units reported double-digit percentage declines in both revenue and earnings. Only its energy infrastructure unit reported a gain in earnings, up 13%, on revenue that was essentially flat.

"In a global economic environment that continues to remain challenging, GE delivered solid second-quarter business results," said GE Chairman and CEO Jeff Immelt in the earnings statement. "We continue to position GE to win in a reset economy."

GE Capital's woes: The recession has been a drag on much of GE's range of businesses, which are often seen as a bellweather for the overall global economy.

Consumers have cut spending on big ticket items such as appliances, while businesses trimmed their own capital spending. A drop in advertising revenue across the media industry has hurt results at NBC Universal.

But GE Capital has been most severely hurt by the problems that have dogged U.S. credit and financial markets for the last nine months, causing it to turn to the government for help.

While GE Capital did not receive help from the Treasury's Troubled Asset Relief Program, or TARP, which was used to bail out banks and automakers, it was one of the largest users of an Federal Deposit Insurance Corp. program to guarantee its debt. It used those guarantees on more than $43 billion of the debt it issued.

Even with that help, problems at GE Capital caused the company to lose its vaunted AAA corporate debt rating in March, and to cut its dividend to preserve capital.

Still the finance unit is on track to be profitable this year, the company said in its statement, as it has substantially increased its capital ratios, reduced leverage, increased reserves, accelerated long-term debt funding and lowered commercial paper balances.

GE Capital lost money on its real estate loans, although its other lines of business posted a profit.

The unit raised its reserves to $6.6 billion from $5.7 billion in the first quarter to cover anticipated increases in lending losses. But the unit should be able to break even or post a modest profit even in the worst-case economic scenario. "In a difficult environment, we are ahead of schedule on our plan to create a more focused financial services company," said Immelt.

GE Chief Financial Officer Keith Sherin said it was premature to say if GE Capital could see any benefits from current problems at business lender CIT Group (CIT, Fortune 500), which could be forced into bankruptcy after its request for additional federal help was rejected earlier this week.

GE Capital has reported a growth in both business and consumer customers compared to a year ago, even as many other financial firms are having to pull back on lending.

Company officials said they were pleased with the results at GE Capital, given the environment in the financial sector. They said they remain committed to keeping the business part of GE and will fight one proposal from the Obama administration that could conceivably force the company to separate its financial operations from its non-financial units. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.