GE Fails to Bring Good Things to Earnings Season


The stock market took a sudden dive on Friday after Dow component General Electric (GE) reported first quarter earnings before the opening bell.

Analysts expected certain divisions such as appliances to be down. What they weren’t expecting was weakness across most of their businesses. More surprising still was that the conglomerate did not issue an earnings warning. CEO Jeffrey Immelt took a cue from retailers who always blame the weather when they fail to meet sales expectations. In a demonstration of GE’s imagination at work, Immelt blamed the drop in commercial finance on the fall of Bear Stearns (BSC). Immelt blamed Bear’s collapse for failing to close certain real estate deals at the end of the quarter. GE took $270 million in write downs on loans and investment securities.

Analysts expected conglomerates like GE to be decoupled from the woes of Wall Street, expecting strong overseas growth to bring in 51 cents EPS. Instead, GE earned 44 cents. GE closed Friday, down $4.70 to $32.05 – the largest one day decline in over 20 years.

Another area of surprise was earnings in GE’s healthcare division declined by 17%. Immelt said that hospitals had problems getting funding to purchase GE’s medical equipment. To put a positive spin on this, the less MRI equipment out there, the better. MRIs have become far too ubiquitous in American healthcare.

Barron’s is making a fairly bullish case for GE today, expecting the company to achieve 10-11% growth in 2009. Barron’s writes that GE “is one of the best plays on the global-infrastructure boom, due to its strength in gas and wind turbines, jet engines and locomotives.” I’m wondering if Barron’s will like GE’s stock in August when transiting Saturn in Virgo will hit the brakes on GE’s Neptune and Pluto in Gemini, as well as a couple of other chart placements. Trouble with credit and financing, both for GE and its established and potential clients, might make this stock a better buy at that time.

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