GE cautious on 2013 after sales miss Wall Street target

(Reuters) - General Electric Co reported weaker-than-expected third-quarter revenue, hurt by unfavorable exchange rates, and investors shrugged off an 8.3 percent profit increase and sent the company's shares down more than 2 percent.

GE, the largest U.S. conglomerate, said on Friday that revenue had risen 2.8 percent. 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 percent, however, reflecting continued efforts to cut back the GE Capital finance arm and unfavorable 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 Officer 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 take occur at the end of the year if U.S. lawmakers 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 Inc and Ingersoll-Rand Plc 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 Corp in Portsmouth, New Hampshire.

"They met expectations for earnings, and they were light on revenues," he said. "If you add back forex, they beat."

GE said exchange-rate fluctuations had lowered its reported revenue by $1.1 billion in the quarter.

Its shares fell 2.5 percent to $22.24 on the New York Stock Exchange, giving back a little of their significant gains over the past year.

At Thursday's close, GE has climbed about 41 percent over the past year, reaching levels not seen since the 2008 financial crisis and sharply outpacing the 22 percent rise of the Dow Jones industrial average.

ENERGY UNIT OFFSETS EUROPE

Among GE units, the energy infrastructure arm had the biggest revenue growth, with a 12 percent increase in the quarter. Immelt had bulked up that business in 2010 and 2011 with an $11 billion wave of acquisitions, largely in the oil and gas sector.

Most major industrials have experienced weak demand in Europe as a result of the debt crisis there.

GE has been no exception to that trend, although Immelt told investors late last month that business in Europe has been no worse than the company had expected.

"The most important thing out of the earnings report is that they kept their full 2012 outlook," said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York. "The fourth quarter, we think, is going to be challenging for companies, especially on the revenue side. Them keeping that outlook intact is a positive."

The Fairfield, Connecticut-based company laid out plans last month to cut its selling, general and administrative costs by $700 million to $1 billion next year in the face of the uncertain economy.

Immelt has also committed the company to buy back enough stock to lower its share count below 10 billion - its level in 2008. That year GE sold new shares to raise cash during the financial crisis.

GE said it had bought back $3 billion worth of shares so far this year. As of September 30, GE had 10.52 billion shares outstanding, down from 10.58 billion a year earlier.

GE competes with some of the world's largest and best-financed manufacturing groups, including United Technologies Corp, Germany's Siemens AG and France's Alstom SA.

(Additional reporting by Ernest Scheyder, Patricia Kranz and Chuck Mikolajczak in New York; Editing by Lisa Von Ahn and Jeffrey Benkoe)

Source: http://news.yahoo.com/ge-profit-8-3-percent-third-quarter-energy-103833957--sector.html

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