Subject:  GE Reports Lower 2nd-Quarter Profit |
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RANDY DAVIS
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Date Posted: 14:50:47 07/11/03 Fri
GE Reports Lower 2nd-Quarter Profit
GE Says Second-Quarter Profit Fell 14 Percent From Previous Year, Narrows 2003 Forecast
The Associated Press
HARTFORD, Conn. July 11 —
General Electric Co. narrowed its earnings forecast for the full year Friday after reporting second-quarter net income was down 14 percent from the previous year.
The industrial, financial and media conglomerate said an expected falloff in its power systems division drove down the quarterly earnings and said uncertainty in its plastics division was affecting the full-year outlook.
But GE said June orders in the plastics segment had started to show some recovery, and noted that plastics demand in the key China market usually peaks in the middle of the year, when production picks up ahead of the Christmas buying season.
The company also said eight of its 13 businesses saw double-digit profit growth in the second quarter.
In trading on the New York Stock Exchange, GE shares fell 7 cents to close at $28.12.
GE reported net income for the April-June quarter of $3.8 billion, or 38 cents per share, down from $4.4 billion, or 44 cents per share, a year ago. The earnings met the expectations of analysts surveyed by Thomson First Call.
Revenue in the second quarter was almost unchanged at $33.37 billion this year compared with $33.33 billion last year. GE said its industrial revenues were down nearly 9 percent, mostly because of a decline in its power systems business.
The eight segments reporting double-digit profit growth in the second quarter of this year were commercial finance, consumer finance, consumer products, industrial systems, insurance, medical systems, specialty materials and the media division including the NBC television, GE said.
"The year is turning out as planned," GE chairman Jeff Immelt said. "As expected, the ramp-down of our turbine shipments in the first half created earnings pressure. However, we are executing with broad-based strength to generate significant growth in the second half."
The company shaved 9 cents a share off the top of its earnings guidance for all of 2003, lowering the range to $1.55 to $1.61 per share. Earlier guidance had ranged from $1.55 to $1.70 per share. Analysts' consensus forecast was for earnings of $1.60 a share for the year.
Raw materials prices in the plastics division have remained higher than the company expected while the Iraq war and concerns about the SARS virus, especially in China, drove sales volume down.
To be on target for the year, GE said it needs benzene prices to drop below $1.25 a gallon and sales volume to pick up from first-half results. The July spot price for benzene was $1.29 a gallon, and GE said June sales were about 386 million tons, squarely in the middle of the goal range for the second half of the year.
Analyst James Kelleher of Argus Research Corp. in New York said GE seemed to be managing the bottom of the power systems business cycle as well as could be expected, adding revenue through service contracts and controlling costs.
The news about plastics was disappointing, he said, though the uptick in June orders was encouraging.
"It would have been nice if they had narrowed the (full-year forecast) range for both the top and the bottom," Kelleher said.
Robert Friedman, an analyst with Standard & Poor's in New York, said GE may be hard-pressed to meet investor expectations for consistent, double-digit earnings growth.
"Given the company's enormous asset, revenue and equity base, in my opinion the probability is low that they'll be able to pump out 10 percent EPS growth year over year," he said.
For the first half of 2003, net income totaled $6.8 billion, or 68 cents per share, down 2 percent versus $6.9 billion, or 69 cents per share, in the first half of 2002.
Revenues for the first half totaled $63.83 billion, compared with $63.98 billion in 2002.
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