As Posted by: Wall Street JournalJeffrey Immelt lowered profit projections for General Electric Co.'s industrial businesses -- including jet engines, power turbines and medical equipment -- but said the units should still make money despite the global economic downturn.
Chairman Jeffrey Immelt said GE expects its revenue to fall up to 5% next year as the company's finance unit shrinks amid the credit crisis.
Mr. Immelt declined to offer a corporate-wide earnings forecast for 2009. But his projection for the industrial units for next year, combined with GE's previously announced plan to shrink its finance unit, suggest overall profit at the Fairfield, Conn., conglomerate will decline in 2009 for a second consecutive year.
GE had to lower its earnings forecast several times this year, contributing to a 52% decline in its shares in 2008.
Mr. Immelt said GE had dropped plans for the moment to sell or spin off its unit that includes its light bulb and appliance divisions. Analysts say the operations had generated little interest from potential buyers.
Mr. Immelt said GE had managed the credit crisis and recession better than competitors and would benefit next year from its services businesses and declining materials costs. "We come through this having learned a lot," he told analysts and investors in his annual outlook speech at NBC's studios in New York. "I'd say the environment is toughest for people of my generation. It's the toughest environment we have ever seen."
Mr. Immelt said GE projects its revenue, estimated at $185 billion this year, will decline as much as 5% next year, as it shrinks the finance unit in response to the credit crisis. But he said GE has no plans to divest the unit, which he said still meshes well with other GE businesses. For example, the unit offers financing to buyers of its industrial products.
Mr. Immelt reiterated GE's plan to maintain its annual dividend of $1.24 a share next year. Some analysts have questioned whether the dividend, which now represents almost a 7% yield on GE shares, would consume almost all the company's cash flow, leaving little money for strategic moves and little margin for error.
GE will take $5 billion out of costs in 2009 through restructuring and headcount reductions, Mr. Immelt said.
GE shares rose 97 cents, or 5.7%, to $17.92 in 4 p.m. New York Stock Exchange trading Tuesday, slightly outpacing the gain in the Dow Jones Industrial Average.
Mr. Immelt said profit in GE's industrial units would rise less than 5% next year. That is less than half of GE's October projection of 10%. The segment also includes NBC Universal.
Deane Dray, a GE analyst, called the new projection "reasonable." Other analysts had been projecting profit in GE's industrial units to decline next year. Mr. Immelt said GE will enter 2009 with roughly $55 billion in backlogged orders for industrial equipment, equal to the backlog in July.
Analysts expect GE to post overall earnings of $1.50 a share in 2009, down from GE's projection of $1.78 to $1.84 for this year and $2.20 in profit last year, according to Thomson Reuters.
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