GE brings bad things to Wall Street

Posted Apr 11th 2008 9:00AM by Peter Cohan
Filed under: Earnings Reports, General Electric (GE)

CNNMoney reports that General Electric Company (NYSE: GE) missed earnings expectations by a mile. Its net income fell 12% to $4.4 billion, or 44 cents per share, seven cents less than what Thomson Financial's polling of analysts had estimated.

In February I analyzed GE's breakup value and concluded that the stock was probably a bit overvalued. The big problem with today's earnings announcement was GE's financial services unit. Like Wall Street banks, GE suffered from "extraordinary disruption in the capital markets in March [which] affected our ability to complete asset sales and resulted in higher mark-to-market losses and impairments."

But that's not all. GE missed on revenues and lowered its guidance. Sales rose 8% to $42.2 billion, $1.5 billion below analysts' forecast of $43.7 billion. GE lowered its full year guidance to between $2.20 and $2.30 per share, reflecting flat to 5% growth. GE is down 11% in pre-market.

Since its current CEO, Jeff Immelt took over in September 2001, GE stock has fallen 20% from $41 to $33. Remind me again of why the "great" Jack Welch chose Immelt to succeed him.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns GE shares.

Tags: conglomerates, ge, ge industrial, ge money, GeIndustrial, GeMoney, inthenews, jack welch, JackWelch, jeffrey immelt, JeffreyImmelt, nbc universal, NbcUniversal

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Reader Comments (Page 1 of 1)

4-12-2008 @ 3:16AM

Kent said...

Double whammy for big U.S. companies: GE purchased growth like most conglomerates through acquisitions and asset sell-offs but no longer a viable stratgegy due to shortages in the capital markets; second, being no. 1 in most markets constrain future growth and require GE to take a re-look at adopting more reliance on start-up strategies although results will take longer to achieve in the short term. This is the downside of capitalism, but inversely rewarding when the economy is booming.

6-06-2008 @ 12:39PM

joseph said...

welch turned over to immelt 10 billion shares earning a paltry $1.27/share. who, in their right mind would ever pay more than $18/share for a stock paying a $.57 dividend?. the fools that paid $60/share are the ones berating immelt when the should be cursing welch.