WASHINGTON (AP) - General Electric Co. is scheduled to report its first-quarter financial results Friday, April 17, before the market opens. Below is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Fairfield, Conn.-based GE has a stake in almost every sector of a U.S. economy in a severe recession. It builds turbines for power plants and high-tech medical machines. Jetliners use GE engines. When homeowners remodel, GE’s stainless steel ovens and refrigerators anchor their kitchens. And many people still screw GE light bulbs into their living room lamps.
GE is also a barometer of the health of the financial world through its lending arm GE Capital. The unit, which until recently made up about half of GE’s profit, has suffered from growing losses in areas like credit card lending and commercial real estate during the financial crisis.
During the first quarter, GE slashed its dividend for the first time in 60 years and lost its top credit ratings during the quarter largely because of GE Capital’s growing losses in areas like credit cards and commercial real estate.
While the company spent most of the first quarter trying to calm fears about its finance business, it will also need to reassure investors that it’s industrial division is weathering the deep downturn and is healthy enough to overcome GE Capital’s woes. GE expects its industrial businesses to earn up to $5 billion this year, while GE Capital may just break even.
GE is also laying off workers, though it hasn’t provided a companywide figure. Cutbacks have come at units including GE Capital, the healthcare equipment, and GE’s transportation division.
BY THE NUMBERS: Analysts polled by Thomson Reuters expect quarterly earnings of 21 cents per share on revenue of $39 billion.
ANALYST TAKE: Analysts predict GE will report lower sales for equipment like jet engines, high tech medical equipment, microwave ovens and light bulbs, a sign of depressed demand from consumers and businesses during the recession.
There may be a few bright spots. GE’s business making turbines for power plant, energy generating windmills and equipment for a new energy saving power grid is expected to report relatively strong earnings that some analysts believe will be a big reason GE will turn a profit in the quarter.
Utilities are expanding their plants, analysts said, driving the need for new turbines. GE is also selling 56 gas turbines to Iraq, a $3 billion deal signed in December. It could also benefit from the $787 billion stimulus package, which includes money for clean energy like windmills.
“GE needs to see solid performance coming out of energy,” said Joel Levington, director of corporate credit for Hyperion Brookfield Asset Management in New York.
WHAT’S AHEAD: GE Capital remains a major concern. Following a nearly 60-percent drop in its 2009 share price by early March, GE Capital gave investors an exhaustive look at its books to convince them that it wasn’t hiding big losses and would not need more capital.
GE has said GE Capital will be profitable this quarter, but analysts say that will only be because of tax benefits connected to reserves set aside to cover potential loan losses. Before those tax benefits are factored in, Nigel Coe of Deutsche Bank estimated GE Capital would post a loss of $600 million, well down from $2.5 billion in 2008 first quarter earnings.
STOCK PERFORMANCE: GE’s stock fell sharply during the first three months of 2009, dropping as low as $5.72 in March after opening the year at $16.20. Shares recovered late in March to close the quarter at $10.11, but were still down nearly 40 percent from the start of the year. By comparison, the 30-stock Dow Jones Index, which includes GE, was down only about 10 percent.