GE earnings plunge, but beat expectations
Filed under: Company News, Earnings
General Electric (GE) announced today that second-quarter 2009 earnings fell a smaller than expected 47 percent, as earnings from energy equipment somewhat offset declines in finance, health care and NBC Universal arms. Profit from continuing operations was $2.9 billion, or 26 cents per share. Revenue from continuing operations was down 17 percent to $39.1 billion. The results beat analyst earnings estimates of 23 cents per share, but were below the top line estimate of $42.16 billion. "In a global economic environment that continues to remain challenging, GE delivered solid second-quarter business results," GE Chairman and CEO Jeff Immelt said. But what Immelt calls solid and what the results show may not satisfy investors as the declines were widespread across many segments, and the good news kept being "offset" -- a word that starred in the report -- by less than stellar news.
Investors' main concern was GE Capital. As mentioned, revenue declined 29 percent in the second quarter and Capital Finance profit plunged 80 percent in the quarter to $590 million. Breaking down the segments, real estate revenue fell a larger-than-expected 48 percent from nearly $2 billion to $1 billion in the quarter. The real estate division lost $237 million, compared to a profit of $484 million in the same quarter last year.
"In a difficult environment, we are ahead of schedule on our plan to create a more focused financial services company. Capital Finance [...] remains on track to be profitable for the full year," Immelt said. Loan volume was 25 percent higher than the prior quarter, even as it continues to reduce its balance sheet. Borrowing by GE's finance arm has been high thanks to its eligibility for the Temporary Liquidity Guarantee Program, which it used more than any other firm.
Cash flow was another concern investors had as the company has more retirees than employees. At least here, the offset was to the positive side as strong working capital improvements more than made up for declines in progress payments, leading to results ahead of operating targets. Cash generated from operating activities totaled $7.1 billion, ahead of plan.
Recently, with CIT Group (CIT)'s collapse, many have compared it to GE Capital because of the mix in its loan portfolio. However, analysts think the problems at CIT could actually be a boon to GE Capital, as it can lure customers away and in the event of its bankruptcy, even raise rates. It's not clear how this would mesh with GE's strategy of shrinking GE Capital to 30 percent of total profits from around 50 percent in the past.
In recent pre-market trading, GE stock traded 1.5 percent lower, reflecting concerns arising from the difficulties shown in the report despite Immelt's assertion that "We continue to position GE to win in a reset economy."
Disclosure: Long GE
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Reader Comments (Page 1 of 1)
7-17-2009 @ 10:01AM
MaryLou Michelin said...
Immelt needs to retire ----with no package, He has run GE into the ground.
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7-19-2009 @ 10:50AM
ThereYaGoAgain said...
Its amazing how people voted in all these Democrats and are shocked they are behaving like Democrats. The dumbed-down American electorate had their chance. They picked the media darling, do-no-wrong union backed, hollywood backed, tree hugger Savior. Too bad they forgot about what made the USA strong and prosperous. Hard work, values and very little government.
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7-17-2009 @ 12:06PM
b.borders said...
You G.E. stockholders better fire Immelt. He has done nothing but ruin the CO. His hope is the Climate Change Bill, whereby OUR taxes go to save his ASS. Mark my words the ONLY thing this bill will do if passed, is make Obama and HIS "cronies" rich. If you think Halliburton and Cheney wer bad, this will be 100 times worse. Remember Cap and Trade started with ENRON and how many Americans were hurt by that CO. G.E. and Obama, with a big FAT GORE added in will hurt 100 times more than ENRON. Hey, do you think the Community Projects (walking paths) in the Health Care Bill, will make FAT AL, more healthy. How about FAT BARNEY? Oh I forgot Congress will not be part of the CRAPPY Health Care Bill.
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7-17-2009 @ 1:02PM
Wendell said...
Why doesn't the board of GE do it's job, protect the shareholders, and fire Immelt? Is it because they too hold loyalty to Obama ahead of shareholder interests? This once proud American success story company is doing business with Iran while Iran sends IED's into Afghanistan. Now, GE is in bed with the Obama administration in a way that reminds one of Fascist Italy or Germany. Get rid of Immelt, or this company is busted.
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7-17-2009 @ 1:22PM
Lee said...
I had always bought GE appliances, no more, I agree with all emails.
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7-17-2009 @ 2:13PM
john said...
Maybe just maybe if they would get rid of some of the radical left wing suckups on NBC news people will watch it. All i ever see on that news channel is people like Meddows and the ED show bashing anybody w/ different views then theirs. The board should also fire Immelt. Ever since he took over the company has gone to crap. What else does he need to show that he shouldn't even run a lemonade stand
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7-17-2009 @ 8:01PM
wweronko said...
I have stopped buying GE products years ago as it shifted to this fringe left wing nonsense. Immelt needs togo.
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7-17-2009 @ 3:05PM
Greg said...
FairTax is a pure play to lower taxes for the wealthy. Wouldn't any person with an income over $5 million--paying 34% to 35% of gross--love a tax rate of 30% of gross? And wouldn't any person with an income of $60,000 love to pay a Fair Tax of 30% of gross rather than the 11% of gross he/she pays now? BTW, the "FairTax" tax calculator at the site is the biggist bunch of arithmetic nonsense I've ever seen. It actually told me I'd have $315 less purchasing power and save $231 in federal taxes. I'll pay the $231 tax to get the $315 purchasing power, thanks!
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7-17-2009 @ 3:51PM
Driver X said...
ImMelt Down at GE. The man needs to go!
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7-17-2009 @ 4:00PM
Save America said...
That is what GE gets for being part of the Obama regime to make mega bucks on the cap & trade. This company and the news station need to fail. We do not need their type of treason to the people for minipulating the public regarding Global climate. Pelosi's husbands business need to fail too. Everyone has big plans to make big money off of americans.
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7-17-2009 @ 6:58PM
Larry and Tia Batek said...
GE profit margin tanks.GE declares bankruptcy.Obama bails out GE.MSNBC is in the tank for Obama.CIT declares bankruptcy.CIT is no longer because the bailout funds were used by GE to acquire CIT.MSNBC is owned by GE.This is more than fraud.This is crime in its purest sense.Who pays for this mess?You the United States taxpayer.Ring your Senator and Representatives phone off the hook!This is Grand Larceny! Larry Batek
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7-19-2009 @ 7:54PM
setec5354 said...
GE will be a buy at $3.00 and not at the current price which will drop hard as a rock!!!!
100% worth watching.!!
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