By The Associated Press
General Electric Co. said Friday its first-quarter earnings fell 36 percent on sharply lower profits at its troubled finance arm, but the results beat Wall Street forecasts in a glimmer of good news for the struggling company.
The results are further proof of how much the woes of GE Capital, which finances businesses ranging from credit cards to commercial real estate, have hobbled one of the nation’s biggest companies. But the earnings also suggest that GE’s strategy of relying on its base of industrial businesses to carry it through a rough year may be paying off, at least for now.
GE, which has a stake in almost every sector of the economy, from light bulbs to windmills, reported net income of $2.74 billion, or 26 cents per share, after paying preferred dividends. That fell from $4.30 billion, or 43 cents per share, a year earlier.
Earnings from continuing operations were also 26 cents per share. That surpassed the 21 cents per share forecast by analysts. Shares of the Fairfield, Conn.-based company fell 38 cents, or 3.1 percent, to $11.89 in early trading after rising in pre-market trading.
GE’s industrial sales slipped one percent, a possible sign of resiliency despite tough economic conditions. The company posted stronger results in divisions that make power plant turbines and jet engines, balancing drops in its entertainment, consumer products and healthcare operations.
Earnings at GE Capital slid 58 percent, but still amounted to $1.12 billion, holding to GE’s prediction last month that the segment would be profitable despite growing losses on its loans. GE said Friday that the unit is on track to turn a profit in 2009.
Especially hard hit was GE Capital’s real estate business, which includes, which includes its lending and holdings in commercial real estate, The unit posted a $173 million loss in the quarter, versus a $476 million profit a year earlier. Profits dropped at GE Capital’s heavy equipment lending business, and its unit that provides financing for energy projects.
Jeff Immelt, GE’s CEO, said the company still believes it won’t have to raise new capital to prop up GE Capital. That has been a major worry for investors and contributed to a steep slide in GE’s share price earlier this year.
GE gave investors an exhaustive review of GE Capital’s finances in March in an attempt to rebuild confidence following a 60 percent slide in share prices from the start of the year. The company has warned that GE Capital, which once made up about half of GE’s profits, could just break even this year if the economy continues to worsen. But GE has also said it wouldn’t have to plug more money into GE Capital, which has helped the share price recover somewhat.
Overall revenues, including a 20 percent drop at GE Capital, fell 9 percent to $38 billion, with sales down or flat in every division except GE’s energy business. The broad recession has hurt many of GE’s industrial businesses that make products like medical equipment for hospitals and household appliances.
GE said sales from power plant turbines, windmills and other energy work rose 7 percent to $8.24 billion. Sales in GE’s aviation business, which makes jet engines and does repair work on existing equipment, rose 12 percent.
Other segments suffered. Sales were down 9 percent at GE’s healthcare division, and fell 22 percent for the consumer and industrial segment that makes refrigerators and microwaves. GE’s entertainment division, which includes the NBC television network, posted a 2 percent drop in sales, which GE attributed to softer advertising markets and weaker DVD sales.
The first quarter included some ignominious developments for GE, most of them caused by GE Capital. In late February, GE slashed its dividend by 68 percent, a move that GE expects will save it $9 billion in cash but was the first dividend cut since 1938. Two weeks later, GE lost its rare top ’AAA’ Standard & Poor’s credit rating.