Pressure eases on GE's Immelt
NEW YORK (Reuters) - General Electric Chief Executive Jeff Immelt can breathe a little easier this weekend.
A quarterly profit report from Immelt's General Electric Co (GE.N) met Wall Street expectations and has eased pressure on the U.S. conglomerate's CEO, who faced a withering stream of criticism three months ago when GE missed profit forecasts.
"Jeff Immelt is off the hook," said Jack Ablin, chief investment officer with Harris Private Bank in Chicago.
Delivering in-line results and keeping its full-year forecast unchanged, GE restored some of its credibility among investors, analysts and investors said on Friday.
Confidence in the sole remaining original member of the blue-chip Dow Jones industrial average .DJI was shaken in April, since GE's profit miss was so uncharacteristic for a company known for years for hitting its numbers. The miss, and a cut in GE's full-year forecast, came only a month after Immelt told a widely watched investor briefing the company was on track toward hitting its 2008 goals.
Even Immelt's predecessor, Jack Welch, said Immelt had a "credibility issue" in the wake of the news, though Welch later backpedaled, calling Immelt a "helluva CEO."
Immelt took over from Welch in September 2001. Though GE sales and profits have grown steadily since then, its stock price is down almost 30 percent. The Dow is up 15 percent over that time frame.
The GE board supports Immelt, said spokesman Gary Sheffer.
"The underlying performance of the company has been very strong under Jeff's leadership," Sheffer said. "The company portfolio has been transformed toward higher growth, higher margin businesses. Earnings and revenue have grown significantly during that time. In fact the earnings have about doubled since he took over as CEO."
GE, which has faced pressure to offload lower-performing divisions, said it expected to spin off its consumer and industrial businesses in the first half of next year, and on Friday concluded a year-old effort to pull out of consumer lending in Japan.
EASING PRESSURE
Pressure on Immelt has eased a little bit, said Jeff Markunas, manager of the RidgeWorth Large Cap Core Equity Fund, where GE is among the top holdings.
"I wouldn't call it seismic," he said of the change in sentiment. "There's a lot of pressure and focus on him."
One decent quarter won't erase memories of the shocking shortfall in April, he added.
Transforming the portfolio is key to how the CEO is perceived, said Nick Heymann, an analyst with Sterne Agee in New York, who predicts GE will take major steps, like selling NBC Universal, after the Beijing Olympics.
"The pressure is not off (Immelt) until it's done," Heymann said.
GE bought itself a quarter of breathing room, but responsibility for recent underperformance ultimately rests with the CEO, said Pete Sorrentino of Huntington Asset Advisors in Cincinnati, which owns GE shares.
"There is a qualified sigh of relief," he said.
Huntington has not been adding to its GE holdings in recent months, instead putting money into other diversified industrials, like Emerson Electric Co (EMR.N).
"Jeff Immelt is a bright and capable manager, but somebody will have to bear the burden for the fact that GE has not delivered at a time when everybody expected it would."
(Additional reporting by Deborah Jian Lee in New York and Scott Malone in Boston; Editing by Gary Hill)
