NEW YORK General Electric Co (GE.N) expects to record double-digit percentage earnings growth next year, helped by strong demand in the United States and Asia, but is bracing for a slowdown in Europe.
The largest U.S. conglomerate expects to record 3 cents to 4 cents per share of restructuring charges in the fourth quarter as it cuts costs in anticipation of weakening demand on the continent for health care and lighting equipment.
"We want to be cautious and we want to be ready for next year," Chief Executive Jeff Immelt told reporters in New York on Tuesday after a meeting with investors to discuss the company's 2012 expectations. "We want to keep investing in growth and at the same time we want to be prudent about the macro environment."
The world's largest maker of jet engines and electric turbines said it expects overall revenue to rise 5 percent next year, with 5 to 10 percent of growth at its industrial arms more than offsetting planned declines at GE Capital, as the company continues to scale back the finance unit.
Europe's spreading sovereign debt crisis stands as the biggest risk the world economy is currently facing, with investors and company managers wondering whether any slowdown will be confined to Europe or if it will take a toll on the U.S. or rapidly developing economies in Asia and Latin America.
"Europe will probably be the biggest wildcard, not just for GE, for all multinationals," said Edward Jones capital-goods analyst Matt Collins. "If recent trends hold up, 2012 could be the year where the U.S. is the place to be for growth."
HEDGING FOR VOLATILE TIMES
The company aims to cut its operating costs by about 0.5 percentage points of sales per year over the next four years and could accelerate those cuts if the economy got significantly worse than it currently expects, Immelt said. A slowing U.S. economy would ease pressure on the price of raw materials, from industrial metals to oil, he noted.
"We have some hedges built in the plan if the macro environment gets tougher, from an industrial standpoint," Immelt told investors at a meeting in New York held in the studio where the long-running "Saturday Night Live" television show is shot.
He reiterated GE's recent statements that its GE Capital arm has minimal exposure to the sovereign debt of eurozone governments.
The company, which no longer provides per-share profit targets to investors, said it expects profit to grow at double-digit rates at its energy, aviation and railroad locomotive units, as well as at GE Capital, and at single-digit rates at its division that make healthcare equipment and lighting and appliances.
GE shares closed down 4 cents at $16.42. The broader market also closed lower on Tuesday.
"We feel good about the world. It's not without problems but we feel pretty good," Immelt told the annual meeting. "The world's risky and volatile but there's a lot of opportunity out there."
GE said it expected to gain market share next year in the market for narrow-body jet engines and wind turbines.
Analysts, on average, expect GE to earn $1.56 per share in 2012 on sales of $150.8 billion, up from $1.37 per share and $149.7 billion estimated for 2011.
GE, which last week raised its dividend for the fourth time since July 2010, said it aimed to increase the dividend in line with earnings and said its top two priorities for cash are the payout and reducing its share float. The company, which has spent billions to broaden its energy portfolio, said it was likely to add smaller bolt-on acquisitions in the $1 billion to $3 billion range.
The company is one of several multinational industrial companies laying out their 2012 forecasts this week.
Last week, 3M Co (MMM.N) forecast 2012 earnings and revenue toward the high end of Wall Street expectations, citing "slow but positive growth" in the United States and an expected recovery in the global electronics market in the second half of next year.
United Technologies Corp (UTX.N), Honeywell International Inc (HON.N) and Danaher Corp (DHR.N) are set to lay out their expectations in coming days.