GE profit down 44 percent, CEO stands by dividend
General Electric Co reported a 44 percent drop in quarterly profit on weakness at GE Capital and its lighting and appliance units, and warned that 2009 would be “extremely difficult.”
Despite meeting Wall Street’s lowered estimates, earnings at GE Capital — its Achilles heel for the past year — tumbled 67 percent. GE’s energy infrastructure unit, which makes electric turbines and windmills, was the highlight, recording 11 percent profit growth.
Chief Executive Jeff Immelt said on Friday the result — which met Wall Street’s expectations — reflected brutal economic conditions.
“We’re planning for a really tough environment,” Immelt told analysts on a conference call. “The recession is tough, the financial services crisis is worse.”
Investors have become increasingly concerned over the past month that the world’s largest maker of jet engines and electric turbines may have to sacrifice its $1.24 per share annual dividend.
Analysts are also asking whether it could lose its coveted top-tier credit rating, after Standard & Poor’s lowered its outlook to “negative” in December.
“GE is not fully out of the woods and macro uncertainties continue to point to continued risk for the dividend and AAA-rating,” said Goldman Sachs analyst Terry Darling.
The 52-year-old Immelt defended the dividend, calling it “a good return to investors in this moment of uncertainty online payday loans. But we’re not straining in order to pay it … We’ve got lots of cash.”
GE shares fell 5 percent, or 68 cents, to $12.80 on the New York Stock Exchange.
MEETS FORECAST, MAINTAINS OUTLOOK
The Fairfield, Connecticut-based company reported a fourth-quarter profit of $3.72 billion, or 35 cents per diluted share, compared with $6.7 billion, or 66 cents, a year earlier, as the U.S. conglomerate and economic bellwether closed out one of the toughest years in its 117-year history.
Factoring out one-time items, results met Wall Street’s expectations, according to Reuters Estimates.
Revenue fell 4.8 percent to $46.21 billion.
In early December, the company sharply lowered the high end of its fourth-quarter profit forecast.
“While GE clearly is being impacted by recession and its financial business is being impacted by the financial meltdown, they are navigating it,” said David Katz, chief investment officer, Matrix Asset Advisors. “They are getting through, they are earning money through it.”