General Electric on Friday released second-quarter results which were in line with expectations and reaffirmed its full-year earnings target.
The industrial conglomerate, which in the first quarter shocked investors with a surprise drop in earnings and the slashing of full-year forecasts, is widely held as the bellwether for the health of the global economy. The latest set of figures may help alleviate concerns about GE’s health in the face of an economic slowdown and the ongoing credit market crisis.
GE’s quarterly diluted earnings per share fell 4 per cent to $0.98, as loan losses from a financial-services unit crimped results, but the results met the expectations set earlier this year.
More importantly to investors who have questioned the company’s growth prospects, GE said it remained on track to meet its target for a full-year profit increase of as much as 5 per cent.
The company also announced that it had agreed to sell its Japanese consumer finance arm and other businesses to Shinsei Bank, a mid-sized Toyko-based bank that is nearly a third owned by JC Flowers, for $5.4bn.
GE shares rose more than 2 per cent in pre-market trading on Friday but were 19 cents lower at $27.45 just after the opening bell.
“Many markets and industries remain healthy, while the US economy is challenged,” Jeff Immelt, GE’s chief executive, said in a statement. “Opportunities in emerging markets, infrastructure, commodities and global healthcare are creating demand for our businesses, while we fight through the difficulties of a burdened US consumer, a tough housing market, inflation and volatile capital markets.
“Even with all this uncertainty, we still see growth opportunities ahead.”
GE earned $5.4bn from continuing operations during the second quarter, down from $5.6bn a year earlier. Revenue jumped 11 per cent to $46.9bn, exceeding the company’s forecast, on strong demand for jet engines, turbines and other industrial gear.
GE’s infrastructure business, which includes its oil and gas and aviation divisions, reported a 24 per cent jump in profit.
Commercial finance, whose failure to complete enough real-estate transactions in the wake of Bear Stearns’ collapse in late March contributed to GE’s first-quarter shortfall, rebounded to show a 7 per cent profit increase.
Earnings at GE Money, the company’s consumer finance arm, fell 9 per cent.
The company said in a statement that it reached an agreement to sell its money division in Japan, and recorded a $233m loss in discontinued operations stemming from the transaction.
GE’s disappointing first-quarter results sent the company’s shares plunging and fuelled calls to break up the conglomerate. While defending his strategy and track record, Mr Immelt said on Thursday he was leaning toward spinning off GE’s consumer and industrial business to shareholders to help boost returns.
The Fairfield, Connecticut-based company predicted it would earn 50-54 cents a share in the third quarter.