NEW YORK - General Electric Co reported earnings that topped Wall Street expectations, as it kept costs in line despite still-sluggish demand for electric turbines and other heavy equipment.
The largest U.S. conglomerate said on Friday that fourth-quarter profit fell 19 percent to $2.94 billion, or 28 cents per share, from $3.65 billion, or 35 cents per share, a year earlier.
Analysts on average expected profit of 26 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell 10 percent.
JACK DE GAN, CHIEF INVESTMENT OFFICER AT HARBOR ADVISORY
CORP, PORTSMOUTH, NEW HAMPSHIRE
I was surprised by the top line. I was not surprised by the bottom line because they've got so many levers to pull at a big conglomerate like that.
The economy is not as strong as the consensus believes and GE will at some point begin to feel that this year. I also believe that GE capital, since they don't have to mark to market, is taking the stance that they're just going to pull through impairments and writedowns every year from '08 through 2012, until they've taken those things down to appropriate levels.
That will keep continuing pressure on GE capital, which means basically no operating earnings at GE capital between 2008 and 2012.
At these analyst meetings they call deep dives, they've been preparing investors for a long slog in the commercial real estate area. They don't talk about what the markets look like but they're making clear they will be making impairments and markdowns all the way through 2012. The positive earnings GE capital showed was only after tax benefits. The first year you'll see normalized earnings of GE Capital will probably be 2013.
Shares were fully valued before the earrings release.
JAMIE COX OF HARRIS FINANCIAL GROUP IN COLONIAL HEIGHTS,
Other than commercial real estate, every other part of GE Capital was profitable, that's what I would expect in this environment - commercial real estate to lag and everything else has already turned positive. So you have to be pretty excited about that because commercial real estate is, most of the time, the very last thing in a recession to get hit.
I don't like that their revenue has dropped a lot, but that is because of heavy equipment and a lot of the larger things that just cost a lot of money and CapEx was not exactly stellar last year. So that will probably end up working more with those government programs that will influence people to buy washing machines and things like that.
DAVID THEBAULT, HEAD OF QUANTITATIVE SALES TRADING AT
GLOBAL EQUITIES, IN PARIS
They are finally saying the environment is improving, and this is very important. Margins seem to be resilient, the order book looks in pretty good shape, and on a first look, there seems to be no bad surprises from GE Money.
People are crunching the numbers at the moment, but once digested, this has the potential to halt the stock market's recent drop.
JEREMY BATSTONE-CARR, HEAD OF RESEARCH, CHARLES STANLEY,
Investors are less interested in what companies are earning. What investors are more concerned about is the extent to which revenues may come under pressure given the ongoing weakness in the global economy as well as uncertainty pertaining to the outlook.
This could contribute to the weakness in the shares.
GEOFF WILKINSON, HEAD OF INVESTMENT RESEARCH AT MINT
The thing is not to miss and there's a lot of pressure to beat expectations. But I think the results are being overshadowed by the (bank) rule changes.
We've got bigger fish to fry after the Obama comments.
THOMAS VILLALTA, PORTFOLIO MANAGER, JONES VILLALTA
OPPORTUNITY FUND, AUSTIN, TEXAS
It doesn't really change our view too much. You can't get any optimism out of this, or any pessimism out of it. Revenue looks pretty good. I think overall it's a fairly good report but in line with what we were expecting.
Everything except commercial real estate seems to be doing a little bit better. Commercial real estate always seems to be a question mark for them. The way they view is different from how a commercial bank would view it. It's much more of an investment for them and less of a liability.
Possibly they're softening people up for further writedowns in 2010. We could continue to see that.
We got into the stock knowing GE capital was a problematic area. The industrial business has continued to generate some pretty good returns. (Orders) tell us they're on the right track and gives us a little bit of comfort. The capital business we'll just have to wait for better days, which we're hoping to happen by the end of 2010 and into 2011.
CHRISTIAN TEGLLUND BLAABJERG, CHIEF EQUITY STRATEGIST, SAXO
Another quarter with small one-time gains and GECS tax benefits offsetting a soft top line. However clearly an unexpected improvement in the energy and financial section.
The moderately positive outlook for the global economy from GE could fuel another boost in markets due to its global reach.
PERRY ADAMS, VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER,
HUNTINGTON PRIVATE FINANCIAL GROUP, TRAVERSE CITY, MICHIGAN
GE had a very solid quarter. They exceeded expectations on both the top line and the bottom line, which is a positive. The other aspect is orders came in strong, grew sequentially from third quarter and the backlog improved slightly from the third quarter. Overall it was a very positive quarter for GE. Also cash flow came in higher than expected.
The only areas of weakness continue to be consumer and commercial real estate loss trends.
RICHARD HUNTER, HEAD OF EQUITIES, HARGREAVES LANSDOWN,
They were slightly above expectations, (but the market weaker markets) may be a reflection that market expectations may have got slightly too high after the Q3 results.
JOHN KORNITZER, CHIEF EXECUTIVE OFFICER AT KORNITZER
CAPITAL MANAGEMENT, SHAWNEE MISSION, KANSAS
It got its cost in line, I assume they did that in order to report strong earnings, but the revenue is dropping because GE is trying to shrink its finance division.
Based on this I'd say GE is in the turnaround phase. The company has always had good managers and has always been focused. However, I don't think this will by itself turn the market up today. The market is going through a small correction and GE beating by 2 cents isn't going to change that.
DAVID MORRISON, MARKET STRATEGIST, GFT GLOBAL MARKETS,
This is a quarter where just beating on the bottom line on cost cutting just isn't going to cut it anymore. We have seen a number of big examples already. Even companies that have actually come through beating both bottom and top line have also been hit.
Before you could do anything and your shares will be bought. You have really to beat bottom and top line by such a huge margin to see benefit on your shares.
I think investors are a little bit tired and there is nothing to persuade them that they should be buying this market.
(Reporting by Joanne Frearson, Dominic Lau and Simon Falush in London, Blaise Robinson in Paris, Scott Malone in Boston and Nick Zieminski, Chuck Mikolajczak and Ryan Vlastelica in New York, compiled by Chris Kaufman)