The third quarter earnings report from General Electric Co. (NYSE: GE) resembled a glass that is either half-full or half-empty, depending on what one is looking for. The company’s CEO, Jeff Immelt, chose the positive view, noting that orders were growing and that the company’s GE Capital division might have “turned the corner” following two years of losses.
The company posted EPS of $0.18 on revenue of $35.9 billion. EPS from continuing operations were stronger, though, coming in at $0.29, beating expectations of $0.27/share. Analysts had expected revenues of $37.5 billion.
GE added $1.1 billion to its reserves in the third quarter to account for potential liabilities from the sale in 2008 of its Japanese consumer-finance operations to Shinsei Bank. Immelt said that the company now believes it has reserved enough cash to “fully address our claims risk.”
Other weakness in the report came from a -14% drop in the GE’s energy infrastructure business and a -10% drop in the technology infrastructure group. Profit was flat in energy infrastructure, while revenue fell in the technology infrastructure business. Revenue also fell in GE’s NBC Universal division and profits from the group fell -15%. GE is currently spinning off the NBCU division into a joint venture that will be 51%-owned by Comcast Corp. (NASDAQ: CMCSA).
GE Capital posted profit of $871 million for the quarter, up from $141 million in the same period a year ago. The company attributed the rise to better performance in consumer and real-estate lending and lower credit losses. Revenue from GE Capital fell -3.2%.
Immelt focused on order growth, both for equipment and services. Orders in the technology infrastructure group rose 32%, but he didn’t mention orders in the company’s energy infrastructure division. GE’s order backlog stayed flat at $172 billion.
The company has made a substantial commitment to clean-energy products and services over the past few years. But third-quarter revenues and profits don’t seem to reinforce that choice, which was CEO Immelt’s main initiative. To keep shareholders happy, GE raised its dividend and initiated a stock buyback program, but absent sustained growth in operating profits from the energy and technology businesses GE will have to rely on its GE Capital segment and even though management is satisfied now, the fragility of the US economy could cause some serious issues here again. That would not help Immelt.
GE shares are trading down about -4.5% on higher than average volume this morning.
