General Electric's quarterly profit tumbles 47% General Electric Co. said Friday that profit fell 47% in the second quarter, as the industrial giant navigated through a tougher economic environment with fewer infrastructure sales and more credit defaults in its financial business.
For the June quarter, the Fairfield, Conn., conglomerate and Dow Jones Industrial Average component said profit was $2.67 billion, or 24 cents a share, compared to $5.07 billion, or 51 cents, earned in the year-earlier period.
On a continuing-operations basis, earnings in the latest period were 26 cents a share, while analysts polled by FactSet Research were expecting earnings of 24 cents a share, on average.
Analyst earnings typically exclude discontinued operations.
Revenue for the company fell to $39.08 billion from $46.84 billion in the 2008 second quarter. Wall Street was looking for sales of $41.7 billion.
"It was about what I would have expected," said Edward Jones analyst Matt Collins in an interview.
"It's about what they did in the first quarter: they beat estimates but quality was lacking ... because of tax breaks, while order rates in infrastructure continued to decline," he said.
GE /quotes/comstock/13*!ge/quotes/nls/ge (GE 11.66, -0.74, -5.97%) builds jet engines, locomotives and water treatment plants, as well as provides financial backing, health-care products and entertainment, including NBC.
"We are executing through the recession by aggressively controlling costs and driving working capital improvements while continuing to invest for future growth," said Jeff Immelt, chairman and chief executive.
Since hitting an 18-year low in March at $5.73, shares of the company's common stock has rebounded more than 80%, but they remain historically low compared to the past 10 years.
More recently the stock was off about 5% to $11.81.
GE investors have a slew of anxieties, including the decline in the company's aviation and health-care markets as well as the impact of defaults on the company's financial arm, GE Capital. See related item. Cash flow on target to cover GE Capital losses
Cash generated from operating activities during the quarter totaled $7.1 billion, down from $9.3 billion last year. The company said that puts it on pace to beat its 2009 target of $14 billion to $16 billion since it generates more cash in the second half of the year.
"With the dividend reduced from $6.7 billion to $2.3 billion ... we'll save $13 billion of cash in '09 and '10," he said. "I would say we're ahead of plan here with very solid prospects for the rest of the year."
Historically, the company generates about 40% of its cash in the first half of the year.
That should help the company offset losses at GE Capital, which continued to see a climb in both commercial and consumer loan defaults. The company said it expects GE Capital to post a profit for the year, helped by tax breaks due to the losses.
Quarterly profit at GE Capital Services fell 80% to $590 million with revenue down 29% to $13.4 billion.
Industrial profit, which includes NBC Universal, fell about 9% to $4.3 billion with sales off 7% at $26 billion. See NBC Universal story.
The company has seen a decline in overall orders due to the recession, though it hopes business growing out of the government stimulus efforts will reverse that trend later this year.
"While we have only realized limited revenue to date, we believe that activity will increase in the second half of 2009," Immelt said.
Total company backlog of equipment and services held steady at $169 billion as order cancellations remained "extremely low" during the quarter.
Of its segments, only GE's energy infrastructure business saw a jump in profits. It's also expected to gain sales momentum later this year thanks to government stimulus plans and tax credits for alternative energy equipment, such as wind turbines, Immelt said.
In an interview, GE Chief Financial Officer Keith Sherin said the looming bankruptcy of CIT /quotes/comstock/13*!cit/quotes/nls/cit (CIT 0.70, +0.29, +70.39%) has not affected GE Capital, the company's financial unit, though it may be too early to judge whether that will remain so over the long term.
CIT reaches tentative $3 bln deal with bondholders * CIT reached $3 bln financing deal with bondholders
* CIT hopes to avoid bankruptcy with deal
* Bondholder group includes Pimco
* Deal is part of a larger restructuring plan-source (Adds new details on financing)
By Paritosh Bansal
NEW YORK, July 19 (Reuters) - CIT Group Inc (CIT.N) has reached a tentative deal with a bondholder group for $3 billion in rescue financing, which the lender hopes will help it avoid bankruptcy, sources close to the situation said on Sunday.
The bondholder group, which includes Pacific Investment Management Company (Pimco) and some other top CIT holders, is expected to provide the financing with a 2 1/2-year term, the sources said.
CIT's board plans to meet later on Sunday to discuss the terms of the deal, and the lender is expected to announce the deal on Monday if the board approves it, according to one source, who declined to be identified because talks are private.
The deal is part of a larger restructuring plan, the source said.
The $3 billion rescue financing plan will be backed by remaining unsecuritized assets which likely exceed $10 billion, another source familiar with the matter said.
"The $3 billion is new money but securitized by all the remaining unsecuritized assets which probably exceed $10 billion," that source said.
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