General Electric sets cautious tone for 2013
General Electric reported weaker-than-expected third-quarter revenue, hurt by unfavorable exchange rates, and set a cautious tone for 2013, saying it expects the tough economic environment to continue.
The largest US conglomerate on Friday reported a 2.8 per cent rise in sales, with revenue down at its aviation and healthcare arms, while the stronger US dollar crimped overall results by diminishing the value of its foreign sales. Its shares fell almost 3 per cent.
GE, which is also the world's biggest maker of electric turbines and jet engines, stood by its forecast for full-year earnings to rise at a double-digit percentage rate. It said full-year sales would be up just 3 per cent, down from a prior 5 per cent growth forecast, reflecting continued efforts to cut back the GE Capital finance arm and exchange rate fluctuations.
The company, which reported an 8 per cent rise in third-quarter earnings, is not counting on any significant improvement in the world economy next year.
"We're not assuming that Europe gets any better," chief executive Jeff Immelt told investors on a conference call. "We're looking at '13 being kind of like '12, with the big variable being the fiscal cliff."
The fiscal cliff refers to $US600 billion in spending cuts and tax increases that could take effect at the end of the year if US lawmakers fail to reach an accord on shrinking the federal deficit.
GE does not expect those cuts to take effect, Immelt said.
"We're making the same assessment most people do, that somehow it gets resolved," said Immelt, who is a top adviser to President Barack Obama on jobs and the economy.
Third-quarter net income increased to $US3.49 billion, or 33 cents per share, from $US3.22 billion, or 22 cents per share, a year earlier. Factoring out one-time items, the profit was 36 cents per share, meeting the analysts' average estimate.
Revenue rose to $US36.35 billion from $US35.36 billion. Wall Street expected $uS36.94 billion.
"The market will see this as a slight disappointment," after an upbeat late-September presentation to analysts that led some investors to expect stronger growth, said Jack DeGan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire. "They met expectations for earnings, and they were light on revenues," he said. "If you add back forex, they beat."
The Fairfield, Connecticut-based company was not alone in taking a guarded view of next year. Fellow manufacturer Honeywell International Inc, which also reported revenue below analysts' expectations, said it expects revenue to grow at a low-single-digit rate in 2013, excluding the effects of acquisitions and currency fluctuations.
"This is going to be another tough year," Honeywell chief financial officer Dave Anderson said in an interview.
GE shares fell 64 cents to $US22.17 on the New York Stock Exchange, giving back a little of their significant gains over the past year.
At Thursday's close, GE has climbed about 41 per cent over the past year, reaching levels not seen since the 2008 financial crisis and sharply outpacing the 22 per cent rise of the Dow Jones industrial average.
‘‘I would be quite bearish here. They really haven't made much progress," he said.