GE’s Profit Climbs 20%, Helped by ‘E-Business’
General Electric Co., the diversified conglomerate whose businesses range from lightbulbs to broadcasting, said Thursday that its first-quarter profit rose 20%, driven by an increasing focus on product services and “e-business” initiatives, surpassing Wall Street forecasts.
GE said earnings increased to $2.59 billion, or 78 cents a share, from the year-earlier $2.16 billion, or 65 cents.
Last month GE said it expected to “modestly exceed” analysts’ consensus earnings forecast for the quarter, citing “unusually strong momentum” for its businesses worldwide, including appliances, power systems, plastics, aircraft engines and financial powerhouse GE Capital. The statement prompted analysts to lift their consensus earnings estimate by 2 cents, to 77 cents, according to First Call/Thomson Financial. GE’s revenue rose 24% to $29.99 billion.
Despite the strong results, GE shares were lower on the New York Stock Exchange, dropping $6.25 to $150.50.
Shares of Fairfield, Conn.-based GE have traded at historical highs lately amid enthusiasm over the company’s e-business initiatives, which analysts say make GE a role model for “old-economy” companies trying to harness the Internet to cut costs and expand distribution.
“In addition to delivering record first-quarter results, GE’s businesses made aggressive moves to position themselves for strong future growth,” said Jack Welch, GE’s chairman and chief executive.
“GE is poised to deliver another record performance in 2000 thanks to our global growth, the expansion of our product services activities, the rapid introduction of new products . . . and our e-business initiatives,” said Welch, who is scheduled to retire next year after a legendary 20-year stint at the helm of GE.
GE’s Power Systems and Medical Systems businesses turned in especially robust first-quarter growth, helping the company’s industrial businesses achieve double-digit profit growth over the 1999 period.
“It’s really amazing that GE has this whole organization burning on all cylinders,” said Bill Fiala, an analyst at Edward Jones in St. Louis.
“One of their largest businesses, GE Power, is having a 137% earnings increase on an 88% revenue increase--that can carry a quarter.”
He added, “Barring a global economic meltdown somewhere, [GE] can sustain some very strong, double-digit earnings growth for some time. It really helps that they are so diversified that they can weather some bad times in some of their businesses.”
Fiala increased his 2000 earnings projection for GE to $3.78 per share from $3.70, partly in response to the first-quarter earnings, he said. He reiterated his “buy” recommendation on the stock. GE earned $3.22 per share in 1999.
At a Glance
Other earnings, excluding one-time gains or charges unless noted:
* Ameritrade Holding Corp. said its fiscal second-quarter earnings fell 61% to $3.2 million, or 2 cents a share, but beat analyst expectations of a 4-cents-a-share loss, as the online brokerage added 319,000 accounts and trading volume surged. The company boosted spending on advertising and marketing 76%. Revenue climbed 167% to $170.3 million. Ameritrade said it probably will break even for the year and is aiming to earn $2 a share for the following fiscal year.
* Bausch & Lomb Inc.’s profit jumped 59% in the first quarter to $23.9 million, or 42 cents a share, a penny better than forecasts, as revenue rose 4.4% to $406.9 million.
* Cummins Engine Co., the world’s largest maker of high-power diesel engines, said profit climbed 75% in the first quarter to $42 million, or $1.09 a share, 6 cents above analyst expectations, as sales rose 9.5% to $1.65 billion.
* First Union Corp. said profit fell 13% in the first quarter to $838 million, or 85 cents a share, in line with forecasts, as fees slumped at the banking company.
* FleetBoston Financial Corp. said first-quarter earnings grew 22% to $808 million, or 87 cents a share, beating estimates of 80 cents, as the bank capitalized on a strong capital markets business tied to the frenzied stock market.
* Guidant Corp., one of the largest makers of products for treating heart disease, said first-quarter profit rose 21% to $118.8 million, or 38 cents a share, as the company cut production costs and introduced new products. Sales grew 5.8% to $630.7 million. The results matched analyst estimates.
* Kimberly-Clark Corp.’s first-quarter earnings rose 12% to $437.7 million, or 80 cents a share, a penny better than forecasts, as sales grew 8.4% to $3.39 billion. Analysts said higher sales of an improved version of its Scott towels and rising demand for its diapers and swim pants offset higher costs for pulp used in tissues.
* Rockwell International Corp. said its fiscal second-quarter profit rose 15% to $164 million, or 85 cents a share, including an unspecified gain on the sale of real estate in Colorado. Sales grew 4.9% to $1.78 billion, with help from growth in factory software and aircraft devices. Rockwell was expected to earn 84 cents, the average analyst estimate in a First Call/Thomson Financial poll.
* Honeywell International Inc. said first-quarter earnings rose 15% to $506 million, or 63 cents a share, a penny better than forecasts, as profit margins widened at the company’s aerospace, automation and other businesses. Revenue rose 8.3% to $6.04 billion. Year-ago results were restated to reflect the December purchase of Honeywell Inc. by AlliedSignal Inc., which assumed the Honeywell name.
* Marriott International Inc.’s profit edged up 3% to $103 million, or 40 cents a share, a penny better than forecasts, as revenue rose 14% to $2.17 billion. Higher rates at upscale hotels helped boost earnings despite a travel slowdown in January.
* Owens Corning said first-quarter profit rose 9% to $48 million, or 84 cents a share, beating forecasts by 1 cent, as revenue rose 11% to $1.26 billion.
* Office Depot Inc. said earnings fell 5% in the first quarter to $97.1 million, or 29 cents a share, matching estimates, even as sales jumped 17% to $3.06 billion. The retailer blamed the weakness on higher costs for paper, new stores and advertising.
* SLM Holding Corp., better known as Sallie Mae, said first-quarter earnings rose 15% to $137 million, or 83 cents a share, including a gain of $43 million, or about 18 cents a share, from selling zero-coupon Treasury securities. Excluding the gain, the largest buyer of U.S. student loans earned 65 cents a share.
* Unisys Corp. posted a 3% decline in profit to $106.5 million, or 34 cents a share, matching estimates, because of delayed computer-service contracts and a revamping of its sales force. Unisys, which had warned last week that revenue would be down for the quarter, said revenue fell 8.5% to $1.67 billion. The company said second-quarter revenue also would be down slightly from a year ago.
