GE Profit Falls as Revenue Growth Less Than Expected--Update
October 21 2016 - 8:12AM
Dow Jones News
By Joshua Jamerson and Ted Mann
General Electric Co.'s oil and gas business continued to weigh
on revenue growth in the latest quarter, and the industrial giant
said it would increase its stock-buyback program by $4 billion
after disappointing Wall Street this year.
The company also said it is continuing to operate in a "slow
growth and volatile environment," and shares fell 1% to $28.77 in
premarket trading. The stock has fallen 11% in the past three
months through Thursday's close.
GE said organic orders fell 6% amid a focus toward industrial
businesses and away from banking.
GE's power, aviation and renewable energy segments drove
industrial revenue growth, as transportation and in oil and gas
continued to post declines.
The company is under increasing pressure to show results from
its industrial business after its decision to largely exit
financial services last year. A little more than one year ago,
activist investor Trian Fund Management LP announced a $2.5 billion
stake in the company and urged GE to take on $20 billion in
leverage in order to buy back its own shares. Trian also warned GE
against all but bolt-on acquisitions, citing what it said is a poor
track record on past deals.
GE says it is ahead of its targets for share buyback, but hasn't
yet boosted its borrowing to make either a large-scale share
repurchase or a significant acquisition, as some investors have
hoped.
Oil-and-gas revenue fell 25% in the latest quarter as it
grapples with depressed oil prices, and segment profit fell 42%.
Meanwhile, renewable energy revenue rose 66% and revenue from
power, its largest industrial segment, rose 37%.
Over all for the September quarter, GE reported a profit of
$2.03 billion, or 22 cents a share after the payout of preferred
dividends, compared with $2.51 billion, or 25 cents a share, a year
ago. Excluding items, the company earned 32 cents, compared with 29
cents a year ago. Analysts polled by Thomson Reuters projected 30
cents a share.
Revenue rose 4.4% to $29.27 billion. Analysts had expected
$29.64 billion.
GE said its total industrial profit slipped 4.6% to $4.32
billion in the quarter.
Earlier this year, the conglomerate's lending arm, GE Capital,
successfully shed its designation as a "systemically important"
financial institution -- a label that had required the company to
submit to stricter rules and supervision by the Federal Reserve --
after months of shedding assets of the business, long seen as a
distraction by investors who believed it dragged on the company's
share price. GE Chief Executive Jeff Immelt on Friday said in
prepared remarks that its GE Capital asset sales are "substantially
complete."
The company has already bought back $13.7 billion of its own
stock through the first half of the year, and the additional $4
billion in share repurchases announced Friday boosts its buyback
target for the year to $22 billion. The company has a market value
of roughly $260 billion.
So far this year, GE's performance has disappointed. It is
contending with a raft of Wall Street downgrades, a slipping stock
price and weak revenue in the first six months of the year. This
contrasts sharply with 2015, when Mr. Immelt won praise from
analysts and investors for selling most of GE's finance
operation.
The stock rose 24% in 2015, trading above $30 for the first time
since 2008. Shares are down 6.7% so far in 2016.
Write to Joshua Jamerson at joshua.jamerson@wsj.com and Ted Mann
at ted.mann@wsj.com
(END) Dow Jones Newswires
October 21, 2016 07:57 ET (11:57 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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