By BOB SECHLER
Co. on Friday said Europe's ailing economy had sapped its industrial businesses, a downturn that could challenge Chief Executive Jeffrey Immelt's ability to meet performance targets.
The company's first-quarter profit rose 16% and still beat analysts' expectations, but GE lowered a full-year forecast for its industrial units as European orders fell twice as fast as internal projections.
"It was a large surprise for us," Chief Financial Officer [Dear Guest/Member you can't see link before click here to register] said of the 17% decline in European orders last quarter.
Mr. Sherin said in an interview that European customers were delaying projects amid austerity measures and lower economic output.
The Fairfield, Conn., conglomerate generated almost a fifth of its revenue in Europe last year.
GE's overall profit rose in the first quarter, helped by continued improvement at its GE Capital finance arm and ongoing restructuring efforts to cut costs. And its order backlog, a harbinger of long-term profits, climbed to $216 billion from $210 billion at the end of 2012.
The European slowdown and the weakness in GE's power-and-water unit, which makes gas turbines and other products, prompted the company to trim its full-year outlook for its industrial business. It now expects earnings' growth in the "high single digits to double digits," compared with a previous expectation for simply double-digit growth.
Mr. Immelt vowed that GE still will meet or possibly exceed a full-year goal for its overall industrial margin to climb 0.7 percentage point from 2012, although he noted plenty of cushion had been built into the target at the start of the year. GE said it also expects its power-and-water business to improve in the second half, boosted by gas-turbine orders from the Middle East.
The chief executive has plenty of incentive to achieve the goals, because GE's corporate compensation policies tie Mr. Immelt's pay partly to meeting targets for growth and margin improvement in its industrial businesses.
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A General Electric logo is seen on a refrigerator
Investors were jittery despite his assurance, with the stock down about 4% recently at $21.76. Through Thursday's close, GE shares had climbed 8%.
"Wall Street doesn't like to hear that things will get better later, it wants to start seeing results," said Edward Jones analyst Christian Mayes, who has a hold rating on the stock.
"It is going to be a long slog to really get the company moving more toward an industrial division that is boosting profits."
GE reported a profit of $3.53 billion, or 34 cents a share, for the quarter ended March 31, up from $3.03 billion, or 29 cents, a year earlier. Revenue was flat at $35 billion.
Results included a one-time gain in industrial operations of eight cents a share from the sale of GE's remaining stake in the NBCUniversal joint venture. That was partially offset by a charge of four cents a share tied to restructuring and other items. The company's per-share operating earnings, which exclude pension costs, were 39 cents a share, compared with 34 cents.
Revenue from GE's industrial businesses, which include energy infrastructure and aviation, fell 5.7% to $22.67 billion in the first quarter. Profit from the units fell 11% to $2.94 billion. Revenue at GE Capital rose 1.7% to $11.54 billion, while profit there rose 8.7% to $1.93 billion. First-quarter industrial revenue in Europe fell 17%.
Separately, Honeywell Inc., which also has a large European exposure through its auto-parts and industrial-automation units, said Friday that business in the region tracked as expected during the quarter.
The company reported a better-than-expected rise in first-quarter profit and raised the lower end of its full-year guidance. Profit rose to $966 million, or $1.21 per share, from $823 million, or $1.04 a share.
Co. on Friday said Europe's ailing economy had sapped its industrial businesses, a downturn that could challenge Chief Executive Jeffrey Immelt's ability to meet performance targets.
The company's first-quarter profit rose 16% and still beat analysts' expectations, but GE lowered a full-year forecast for its industrial units as European orders fell twice as fast as internal projections.
"It was a large surprise for us," Chief Financial Officer [Dear Guest/Member you can't see link before click here to register] said of the 17% decline in European orders last quarter.
Mr. Sherin said in an interview that European customers were delaying projects amid austerity measures and lower economic output.
The Fairfield, Conn., conglomerate generated almost a fifth of its revenue in Europe last year.
GE's overall profit rose in the first quarter, helped by continued improvement at its GE Capital finance arm and ongoing restructuring efforts to cut costs. And its order backlog, a harbinger of long-term profits, climbed to $216 billion from $210 billion at the end of 2012.
The European slowdown and the weakness in GE's power-and-water unit, which makes gas turbines and other products, prompted the company to trim its full-year outlook for its industrial business. It now expects earnings' growth in the "high single digits to double digits," compared with a previous expectation for simply double-digit growth.
Mr. Immelt vowed that GE still will meet or possibly exceed a full-year goal for its overall industrial margin to climb 0.7 percentage point from 2012, although he noted plenty of cushion had been built into the target at the start of the year. GE said it also expects its power-and-water business to improve in the second half, boosted by gas-turbine orders from the Middle East.
The chief executive has plenty of incentive to achieve the goals, because GE's corporate compensation policies tie Mr. Immelt's pay partly to meeting targets for growth and margin improvement in its industrial businesses.
A General Electric logo is seen on a refrigerator
Investors were jittery despite his assurance, with the stock down about 4% recently at $21.76. Through Thursday's close, GE shares had climbed 8%.
"Wall Street doesn't like to hear that things will get better later, it wants to start seeing results," said Edward Jones analyst Christian Mayes, who has a hold rating on the stock.
"It is going to be a long slog to really get the company moving more toward an industrial division that is boosting profits."
GE reported a profit of $3.53 billion, or 34 cents a share, for the quarter ended March 31, up from $3.03 billion, or 29 cents, a year earlier. Revenue was flat at $35 billion.
Results included a one-time gain in industrial operations of eight cents a share from the sale of GE's remaining stake in the NBCUniversal joint venture. That was partially offset by a charge of four cents a share tied to restructuring and other items. The company's per-share operating earnings, which exclude pension costs, were 39 cents a share, compared with 34 cents.
Revenue from GE's industrial businesses, which include energy infrastructure and aviation, fell 5.7% to $22.67 billion in the first quarter. Profit from the units fell 11% to $2.94 billion. Revenue at GE Capital rose 1.7% to $11.54 billion, while profit there rose 8.7% to $1.93 billion. First-quarter industrial revenue in Europe fell 17%.
Separately, Honeywell Inc., which also has a large European exposure through its auto-parts and industrial-automation units, said Friday that business in the region tracked as expected during the quarter.
The company reported a better-than-expected rise in first-quarter profit and raised the lower end of its full-year guidance. Profit rose to $966 million, or $1.21 per share, from $823 million, or $1.04 a share.