Fri Apr 19, 2013 12:15pm EDT
* 1st-qtr adjusted profit in line with Street view
* Revenue up slightly to $35 billion, beats Street
* Weak Europe, slow turbine sales dent outlook
* No change to dividend, buyback policy
* Shares down nearly 4 percent
By Ernest Scheyder
April 19 (Reuters) - General Electric Co warned ofslowing profit growth in its industrial businesses due toweakness in Europe and sliding turbine sales, unnerving WallStreet and pushing its stock down in morning trading.
The conglomerate, the world's biggest maker of jet enginesand electric turbines, said on Friday it expects industrialprofit to rise by high single digits to double digits this year.Previously it had forecast double-digit growth.
Chief Executive Jeff Immelt blamed slumping sales of windturbines and gas turbines for the outlook cut, as well as theweakening European economy. But he said he still expects overallearnings, which include GE Capital, to improve this year. Asusual, the company did not provide a specific earnings forecast.
Of concern to Wall Street: GE will try to boost earnings byslashing $1 billion in costs this year, rather than relyingprimarily on sales growth.
Wall Street analysts, which earlier in the day hailed GE'sbetter-than-expected first-quarter revenue, grew unnerved as thenew outlook was disclosed on a conference call. Shares of GEwere down nearly 4 percent at midday.
"The level of uncertainty in terms of their ability to meettheir goals has risen a little bit," said Perry Adams, portfoliomanager at Northwestern Bank, which holds GE shares.
GE expects to sell about 95 gas turbines this year, downfrom 133 in 2012, due to sliding electricity demand fromdeveloped markets, Keith Morin, GE's chief financial officer,said in an interview.
Profit in the power & water unit - GE's second-largest unitand the seller of wind and gas turbines - fell 39 percent in thefirst quarter, and results aren't expected to improve.
"We believe it's going to be hard for our power and waterbusiness in 2013 to meet 2012" results, Immelt said on theconference call.
Sales in Europe are "weaker than expected," executives said,as demand drops, not only for GE products but for electricity,which dents demand for turbines.
While orders to the oil and gas unit jumped 26 percent inthe quarter, GE probably won't recognize revenue from some ofthose sales for at least 12 months, Morin said.
"Investors are clearly disappointed," said Brian Langenberg,an independent analyst who tracks GE.
REVENUE BEATS
Strong sales of jet engines and home appliances helped GE's first-quarter revenue beat expectations, assuaging fears of amiss after a lukewarm report on March U.S. factory activity.
GE said revenue rose slightly to $35 billion, surpassing the$34.51 billion analysts had expected, according to ThomsonReuters I/B/E/S.
"That is a beat on revenue, and that's important because theStreet has been very worried about revenue numbers at industrialfirms because the quarter appears to have tailed off in March," said Jack DeGan, chief investment officer at Harbor AdvisoryCorp in Portsmouth, New Hampshire, which owns GE shares.
The Institute for Supply Management said earlier this monththat U.S. factory activity grew at the slowest rate in threemonths in March, suggesting the economy lost some momentum atthe end of the first quarter.
GE shipped 596 commercial jet engines during the quarter,boosting profit at the aviation unit by 9 percent. The companyalso touted a recent contract with Boeing Co to supplyengines for the 777 aircraft.
Despite price increases, consumers gobbled up GE'srefrigerators, stoves and microwaves, boosting profit in thehome and business solutions unit by 39 percent.
The company's order backlog - a closely watched indicator offuture sales - rose to $216 billion from $210 billion in thefourth quarter of 2012. Backlog can be a positive sign thatcustomers are willing to wait in line for a company's products,or a sign that a company is having a hard time meeting demand.GE's backlog has grown consistently in recent quarters.
"To me, when you see a trend, year over year, repeatingitself, there's a business management issue. Eventually, that'sgot to change," said Oliver Pursche, president of Gary GoldbergFinancial Services, which owns GE shares.
Fairfield, Connecticut-based GE said it earned $3.53billion, or 34 cents per share, in the first quarter, comparedwith $3.03 billion, or 29 cents per share, a year earlier.
Excluding one-time items, profit was 35 cents per share,matching analysts' average forecast, according to ThomsonReuters I/B/E/S.
DIVIDEND
GE sold its remaining 49 percent stake in NBC Universal inFebruary and then announced it would use cash from the sale tofund $18 billion in buybacks and dividend payouts this year.
The $18 billion figure includes $10 billion of shares thecompany plans to buy back and GE's dividend, which the companyhiked in December by 12 percent to 19 cents per share quarterly.
The NBC sale helped GE's cash balance jump to $138.1 billionfrom $125.9 billion in the fourth quarter of 2012. The rise hasled some investors to hope for yet another dividend hike.
"I expect it (any dividend increase) to go from 19 cents to21 cents ... but I don't expect it this quarter. Maybe nextquarter," DeGan said.
On the conference call, Immelt said he remains committed tothe plan to remunerate shareholders this year with $18 billionin buybacks and dividends. The company's annual meeting withshareholders is scheduled for New Orleans next week, and someinvestors said they expect a dividend announcement then.
Prior to selling NBC, GE had focused much of its efforts inrecent years on scaling back its financial arm, making it lessdependent on short-term funding and focusing more closely on ahandful of operations, such as financing the sale of industrialequipment and lending money to mid-sized businesses.
GE has said it wants to grow its manufacturing andindustrial units, a return to its roots. Earlier this month itbought oilfield pump maker Lufkin Industries Inc for$2.98 billion, boosting its presence in the fast-growing marketto extract oil and natural gas from shale rock.
Elsewhere on Friday, GE peer Honeywell International Inc posted a better-than-expected quarterly profit, due inpart to cost cuts.
GE and Honeywell kicked off a wave of earnings reports fromthe nation's largest manufacturers; United Technologies Corp and 3M Co are due to post results next week.
* 1st-qtr adjusted profit in line with Street view
* Revenue up slightly to $35 billion, beats Street
* Weak Europe, slow turbine sales dent outlook
* No change to dividend, buyback policy
* Shares down nearly 4 percent
By Ernest Scheyder
April 19 (Reuters) - General Electric Co warned ofslowing profit growth in its industrial businesses due toweakness in Europe and sliding turbine sales, unnerving WallStreet and pushing its stock down in morning trading.
The conglomerate, the world's biggest maker of jet enginesand electric turbines, said on Friday it expects industrialprofit to rise by high single digits to double digits this year.Previously it had forecast double-digit growth.
Chief Executive Jeff Immelt blamed slumping sales of windturbines and gas turbines for the outlook cut, as well as theweakening European economy. But he said he still expects overallearnings, which include GE Capital, to improve this year. Asusual, the company did not provide a specific earnings forecast.
Of concern to Wall Street: GE will try to boost earnings byslashing $1 billion in costs this year, rather than relyingprimarily on sales growth.
Wall Street analysts, which earlier in the day hailed GE'sbetter-than-expected first-quarter revenue, grew unnerved as thenew outlook was disclosed on a conference call. Shares of GEwere down nearly 4 percent at midday.
"The level of uncertainty in terms of their ability to meettheir goals has risen a little bit," said Perry Adams, portfoliomanager at Northwestern Bank, which holds GE shares.
GE expects to sell about 95 gas turbines this year, downfrom 133 in 2012, due to sliding electricity demand fromdeveloped markets, Keith Morin, GE's chief financial officer,said in an interview.
Profit in the power & water unit - GE's second-largest unitand the seller of wind and gas turbines - fell 39 percent in thefirst quarter, and results aren't expected to improve.
"We believe it's going to be hard for our power and waterbusiness in 2013 to meet 2012" results, Immelt said on theconference call.
Sales in Europe are "weaker than expected," executives said,as demand drops, not only for GE products but for electricity,which dents demand for turbines.
While orders to the oil and gas unit jumped 26 percent inthe quarter, GE probably won't recognize revenue from some ofthose sales for at least 12 months, Morin said.
"Investors are clearly disappointed," said Brian Langenberg,an independent analyst who tracks GE.
REVENUE BEATS
Strong sales of jet engines and home appliances helped GE's first-quarter revenue beat expectations, assuaging fears of amiss after a lukewarm report on March U.S. factory activity.
GE said revenue rose slightly to $35 billion, surpassing the$34.51 billion analysts had expected, according to ThomsonReuters I/B/E/S.
"That is a beat on revenue, and that's important because theStreet has been very worried about revenue numbers at industrialfirms because the quarter appears to have tailed off in March," said Jack DeGan, chief investment officer at Harbor AdvisoryCorp in Portsmouth, New Hampshire, which owns GE shares.
The Institute for Supply Management said earlier this monththat U.S. factory activity grew at the slowest rate in threemonths in March, suggesting the economy lost some momentum atthe end of the first quarter.
GE shipped 596 commercial jet engines during the quarter,boosting profit at the aviation unit by 9 percent. The companyalso touted a recent contract with Boeing Co to supplyengines for the 777 aircraft.
Despite price increases, consumers gobbled up GE'srefrigerators, stoves and microwaves, boosting profit in thehome and business solutions unit by 39 percent.
The company's order backlog - a closely watched indicator offuture sales - rose to $216 billion from $210 billion in thefourth quarter of 2012. Backlog can be a positive sign thatcustomers are willing to wait in line for a company's products,or a sign that a company is having a hard time meeting demand.GE's backlog has grown consistently in recent quarters.
"To me, when you see a trend, year over year, repeatingitself, there's a business management issue. Eventually, that'sgot to change," said Oliver Pursche, president of Gary GoldbergFinancial Services, which owns GE shares.
Fairfield, Connecticut-based GE said it earned $3.53billion, or 34 cents per share, in the first quarter, comparedwith $3.03 billion, or 29 cents per share, a year earlier.
Excluding one-time items, profit was 35 cents per share,matching analysts' average forecast, according to ThomsonReuters I/B/E/S.
DIVIDEND
GE sold its remaining 49 percent stake in NBC Universal inFebruary and then announced it would use cash from the sale tofund $18 billion in buybacks and dividend payouts this year.
The $18 billion figure includes $10 billion of shares thecompany plans to buy back and GE's dividend, which the companyhiked in December by 12 percent to 19 cents per share quarterly.
The NBC sale helped GE's cash balance jump to $138.1 billionfrom $125.9 billion in the fourth quarter of 2012. The rise hasled some investors to hope for yet another dividend hike.
"I expect it (any dividend increase) to go from 19 cents to21 cents ... but I don't expect it this quarter. Maybe nextquarter," DeGan said.
On the conference call, Immelt said he remains committed tothe plan to remunerate shareholders this year with $18 billionin buybacks and dividends. The company's annual meeting withshareholders is scheduled for New Orleans next week, and someinvestors said they expect a dividend announcement then.
Prior to selling NBC, GE had focused much of its efforts inrecent years on scaling back its financial arm, making it lessdependent on short-term funding and focusing more closely on ahandful of operations, such as financing the sale of industrialequipment and lending money to mid-sized businesses.
GE has said it wants to grow its manufacturing andindustrial units, a return to its roots. Earlier this month itbought oilfield pump maker Lufkin Industries Inc for$2.98 billion, boosting its presence in the fast-growing marketto extract oil and natural gas from shale rock.
Elsewhere on Friday, GE peer Honeywell International Inc posted a better-than-expected quarterly profit, due inpart to cost cuts.
GE and Honeywell kicked off a wave of earnings reports fromthe nation's largest manufacturers; United Technologies Corp and 3M Co are due to post results next week.