GE revenue hit by exchange rates
New York, October 20, 2012
General Electric reported weaker-than-expected third-quarter revenue, hurt by unfavourable exchange rates, and investors shrugged off an 8.3 per cent profit increase and sent the company's shares down more than 2 per cent.
GE, the largest US conglomerate, said yesterday that revenue had risen 2.8 per cent. Revenue fell at its aviation and healthcare arms, and the stronger dollar hurt results by diminishing the value of foreign sales.
GE, which is also the world's biggest maker of electric turbines and jet engines, stood by its forecast for full-year earnings to rise at a double-digit percentage rate. Full-year sales would be up just 3 per cent, however, reflecting continued efforts to cut back the GE Capital finance arm and unfavourable exchange rates on foreign currencies, the company said.
The company is not counting on any significant improvement in the world economy next year.
"We're not assuming that Europe gets any better," chief executive Jeff Immelt told investors on a conference call. "We're looking at '13 being kind of like '12, with the big variable being the fiscal cliff."
The fiscal cliff refers to $600 billion in spending cuts and tax increases that could occur at the end of the year if US legislators fail to reach an accord on shrinking the federal deficit.
GE does not expect those cuts to take effect, Immelt said.
"We're making the same assessment most people do, that somehow it gets resolved," said Immelt, who is a top adviser to President Barack Obama on jobs on the economy.
GE was not alone in missing analysts' revenue expectations; fellow industrials Honeywell International and Ingersoll-Rand also did so.
Third-quarter net income increased to $3.49 billion, or 33 cents per share, from $3.22 billion, or 22 cents per share, a year earlier.
Factoring out one-time items, the profit was 36 cents per share, meeting the analysts' average estimate, according to Thomson Reuters I/B/E/S. Revenue rose to $36.35 billion from $35.36 billion. Wall Street expected $36.94 billion.
"The market will see this as a slight disappointment," after an upbeat late-September presentation to analysts that led some investors to expect stronger growth, said Jack DeGan, chief investment officer at Harbor Advisory in Portsmouth, New Hampshire. – TradeArabia News Service