GE's profit beat fails to stir Wall Street
BOSTON (Reuters) - General Electric Co posted an 80 percent rise in profit that topped Wall Street's expectations, helped by a strong recovery in its finance arm.
But the results, which followed a series of better-than-expected earnings reports from top U.S. manufacturers, failed to impress investors and shares of the largest U.S. conglomerate fell 2 percent on Thursday.
The world's biggest maker of jet engines and electric turbines also raised its dividend for the third time since July, though Chief Executive Jeff Immelt warned investors that GE does not plan to keep up that pace of increases.
Analysts noted GE's 6 percent rise in revenue -- which came across all divisions -- may have been inflated by a change in its fiscal calendar that added six days to the first quarter.
"Many folks in the stock market today have high expectations," said Peter Klein, a senior portfolio manager at Fifth Third Asset Management in Cleveland. "GE is up from $7 in the depths of the selloff to $20 to $21 and maybe it is forming more of a psychological barrier at that level."
GE shares were down 41 cents at $19.99 on the New York Stock Exchange, with the broad Standard & Poor's 500 index up 0.5 percent.
The company was part of a wave of top U.S. manufacturers that have topped analysts' first-quarter profit expectations. United Technologies Corp, Honeywell International Inc and Danaher Corp also did so and went on to raise their profit forecasts for the year, saying the U.S. economic recovery is firming and that demand from emerging markets including China and India remains robust.
GE expects "very solid operating earnings growth" this year, Immelt said.
An index of U.S. economic health released on Thursday rose for the ninth straight month in March, showing the recovery had not been hit by Japan's nuclear crisis.
SHIFT FROM DEALMAKING TO DIVIDENDS
GE also raised its quarterly dividend by 1 cent to 15 cents, for a 50 percent cumulative increase since July. GE aims to pay out 45 percent of its profit to shareholders.
"Over time we're going to get back to an annual dividend increase," Immelt said. Fellow blue-chip manufacturer United Tech, which last week hiked its payout by 12.9 percent, aims to raise its dividend every five quarters.
Since emerging from the financial crisis and selling a majority stake in NBC Universal to Comcast Corp, GE has invested heavily, spending $14 billion on takeovers over the past year. That pace of dealmaking is likely to slow.
"Our major transactions are done for 2011," Immelt told investors. "Dividend and (share) buybacks take higher priority for the rest of the year."
Some investors expressed concern about GE's recent push in the energy sector. It was the one GE division to see profit fall in the quarter, though GE officials said they expect it to turn around later this year.
"Energy's hot right now and they're buying, which means they're not getting rock-bottom valuations," said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire. "Time will tell if they overpaid or not."
GE CAPITAL PROFIT SURGES
The Fairfield, Connecticut-based company said first-quarter earnings attributable to common shareholders came to $3.36 billion, or 31 cents per share, up from $1.87 billion, or 17 cents per share, a year earlier.
Factoring out one-time items, profit came to 33 cents per share, exceeding analysts' average estimate of 28 cents compiled by Thomson Reuters I/B/E/S.
Profit at GE Capital, which the company has been trimming back, more than tripled, driving the beat.
Revenue rose 6 percent, also topping expectations.
Revenue at GE's industrial units was up 8 percent; factoring out the extra six days it would have risen 6 percent, Chief Financial Officer Keith Sherin said.
GE, which designed the nuclear reactors used at Japan's stricken Fukushima plant, said the crisis had a "small financial impact" on its results. Overall, it said that any hits to its nuclear or healthcare business could be outweighed by the opportunity to sell other equipment.
The company, which has come under fire over the past month for reports of an unusually low 2010 U.S. tax bill, pointed out that its consolidated first-quarter tax rate was 53 percent as a result of the NBC Universal sale.
GE shares have risen 10.8 percent since the start of the year, well ahead of the 4.4 percent gain in the S&P 500.
(Reporting by Scott Malone; Additional reporting by Nick Zieminski in New York, Christoph Steitz in Frankfurt, Harpreet Bhal and Dominic Lau in London; Editing by Lisa Von Ahn, John Wallace, Dave Zimmerman)