Washington: General Electric Co. said on Friday its first-quarter earnings fell 36% 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 totaled $2.74 billion, or 26 cents per share. 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.
GE’s industrial sales slipped 1%, 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%, 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 on 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 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 chief executive, 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.
Overall revenues, including a 20% drop at GE Capital, fell 9% to $38 billion, with sales down or flat in every division except GE’s energy business.
GE said sales from power plant turbines, windmills and other energy work rose 7% to $8.24 billion. Sales in GE’s aviation business, which makes jet engines and does repair work on existing equipment, rose 12%.
Other segments suffered. Sales were down 9% at GE’s health care division, and fell 22% for the consumer and industrial segment that makes refrigerators and microwaves. GE’s entertainment division, which includes the NBC television network, posted a 2% 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%, 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.