GE sees strong industrial economy
Analysts surveyed by Thomson Financial expected per-share earnings of $2.49.
Revenue for 2008 is expected at $195 billion, Chief Executive Jeff Immelt said at an analysts meeting in New York. Analysts projected revenue of $186.5 billion next year.
GE said per-share earnings for the fourth quarter will be 67 cents to 69 cents and earnings will be $2.19 to 2.21 for the year.
GE's outlook is in line with the estimate of $2.20 by analysts.
GE also said it expects revenue of $172 billion for the year, which is slightly better than analysts' estimates of $171.4 billion.
GE shares closed at $37.03, down 38 cents.
The Fairfield-based industrial conglomerate, with properties ranging from aircraft engine manufacturing to the NBC television network, also announced a dividend and stock repurchase of $26 billion, Immelt said at an analyst conference in New York.
"The broad industrial economy that we see is pretty good," Immelt said.
Immelt said the U.S. economy is slowing because of weakness in consumer spending.
"I'm not going to put a happy face on this. Consumers are going to be a challenge in 2008," he said.
But global growth is "as strong as ever," he said.
Immelt said order backlogs, particularly in GE's infrastructure unit, downplayed credit problems.
"Capital markets are in transition. There's a lack of liquidity in some places, a lot of liquidity in other places."
Immelt also said GE is optimistic because of order backlogs, particularly among its big-ticket infrastructure products for aviation, energy, oil and gas, transportation and water and process technologies.
"If the economy gets worse, we still have good backlogs," he said. "I think we're still positioned for a great year even if the economy gets a little bit worse."
NBC Universal has been difficult, Immelt said.
"The network has been a problem spot for sure," he said, citing ratings and the continuing writer's strike.
However, GE hopes NBC will benefit from its coverage of the Beijing Olympics next summer.
Matt Collins, an analyst at Edward Jones, said the strength of financial services will be a big question in 2008.
"So far, GE has avoided the majority of the problems at many other financial services companies," he said.
GE exited the subprime mortgage business earlier this year, reducing its exposure to risky loans.
Immelt was asked by an analyst about whether GE would consider selling portions of GE Money, which provides banking and credit services, and produced $18.4 billion in revenue so far this year. He defended GE Money as a "steady performer," but said GE may consider different ways to run GE Money.
He suggested a "broad partnership" or several smaller partnerships or "just run it the way we run it."
"We're going to have lots of options," Immelt said.
"He definitely didn't shoot the idea down," Collins said. "In this environment when there is a lot of cash floating around, in an environment like that you're always going to be open to possibilities."
Mark Demos, an analyst at Fifth Third Asset Management in Minneapolis, said GE "perhaps lowered the bar for 2008" by projecting per-share earnings at $2.42.
"Investors are a little bit glad that GE set the bar low for 2008," he said.
GE's announcement that it raised its quarterly dividend to 31 cents a share from 28 cents and that it would repurchase $15 billion in stock over three years is good news, Demos said.
"The problem is they've not grown earnings faster than the market since the economic cycle started (in 2003)," he said. "At least one of their businesses has not been hitting. They haven't gotten the whole company to be hitting on all cylinders."
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