Tags: general electric | earnings | profit | oil

GE Power Sales Boost Profit Past Estimates Amid Oil Slump

Friday, 17 April 2015 08:40 AM

General Electric Co. beat analysts’ first-quarter profit estimates, buoyed by rising sales of power-generation equipment amid the drag from low crude prices on its oilfield-equipment business.

Excluding costs for the proposed sale of most of the GE Capital finance business, adjusted profit from continuing operations was 31 cents a share, GE said in a statement Friday. That topped the 30-cent average of eight analyst estimates compiled by Bloomberg.

Fallout from the global rout in oil markets showed up in GE’s sales, which trailed analysts’ estimates. The quarterly performance was still enough to suggest that 2015 operations are “solidly on track” after GE reiterated that it’s heading toward meeting its full-year forecast for industrial earnings, said Nicholas Heymann, a William Blair & Co. analyst.

“You have an increasingly more credible understanding of how to get” to GE’s full-year targets, Heymann said in a telephone interview. “We still don’t have a gauge on how much less oil and gas is going to be down, but it’s not going to be down 20 or 30 percent, it sounds like.”

GE dropped 0.6 percent to $27.11 at 7:52 a.m. in New York before regular trading. The shares rose 8 percent this year through Thursday, compared with a 2.2 percent increase in the Standard & Poor’s 500 Index.

Manufacturing Tilt

Chief Executive Officer Jeffrey Immelt is tilting GE’s operations toward manufacturing, with businesses spanning gas turbines to diesel locomotives to medical equipment. He said April 10 that Fairfield, Connecticut-based GE will sell the bulk of the finance business.

That program includes agreements to unload about $27 billion in real estate assets and authorization to buy back about $50 billion of shares. The company said the move, including pledges to repatriate offshore cash, would result in an aftertax charge of $16 billion in the first quarter.

Excluding the proposed GE Capital divestitures, first- quarter revenue fell 3 percent to $33.1 billion, trailing the average $34.2 billion estimate. On that basis, adjusted profit from continuing operations slid 5 percent to $3.1 billion.

With the GE Capital effect, sales were down 12 percent to $29.4 billion, and the adjusted loss from continuing operations was $10.9 billion.

Job Cuts

Revenue from the oil and gas unit declined 8 percent, the most among GE’s industrial businesses, and profit dropped 3 percent. GE notified regulators during the quarter of plans to cut as many as 575 jobs from its Lufkin division, which makes oilfield pumps.

While GE has said sales and earnings in the crude unit may fall as much as 5 percent this year, the company could make acquisitions in the oil and gas industry, according to Julian Mitchell, an analyst with Credit Suisse Group AG.

“If oil prices stabilize, consolidation in oil and gas is likely to accelerate, and GE could well participate,” Mitchell said in an April 12 note.

GE Power & Water, which is rolling out a new heavy-duty H- class gas turbine this year, boosted revenue 4 percent. The unit is set to grow this year with the 12.4 billion-euro ($13.4 billion) acquisition of Alstom SA’s energy business, a deal that is under review by European regulators.

Industrial margins, a metric used by investors to gauge the strength of GE’s operations, rose 1.2 percentage points to 14.6 percent.

For the full year, industrial earnings will be $1.10 to $1.20 a share, GE said, reaffirming an earlier forecast.

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General Electric Co. beat analysts' first-quarter profit estimates, buoyed by rising sales of power-generation equipment amid the drag from low crude prices on its oilfield-equipment business.
general electric, earnings, profit, oil
Friday, 17 April 2015 08:40 AM
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