GE Hits Forecasts With Double-Digit Growth
General Electric Co. said Wednesday its fourth-quarter earnings rose 16%, in line with expectations, led by strength in its power systems, plastics and GE Capital Services units.
Chief Executive Jack Welch also said the company expects “significant layoffs” once it completes its acquisition of Honeywell International Inc.
GE, the world’s biggest company in terms of stock market capitalization, said growth overseas and online businesses also helped earnings rise to $3.59 billion, or 36 cents a share, from $3.09 billion, or 31 cents, in the year-earlier quarter. Revenue was up 6% to $34.98 billion.
For the full year 2000, GE said, income grew 19% to $12.74 billion, or $1.27 a share, on a 16% gain in revenue to $130 billion.
“GE’s double-digit increases in 2000 again demonstrate the benefits of the company’s continuing emphasis on globalization, growth in services, Six Sigma quality and e-business,” Welch said.
“The strength of our long-cycle businesses combined with our ongoing initiatives--globalization, Six Sigma, product services and e-business--and our new leadership give us enormous confidence that 2001 will be another record year of double-digit earnings increases.”
Six Sigma is a complex quality-control initiative that Welch has championed across the entire corporation since the mid-1990s.
Welch would not estimate the number of layoffs or say when the jobs would be cut. But he said the layoffs will be fueled by three factors: volume slowdowns, increased efficiency as Internet initiatives mature and eliminations of duplicate positions in the two companies.
GE’s Power Systems division, which makes gas turbines and other power generation equipment, had the strongest growth during the quarter, with earnings up 44%. That was followed by the company’s plastics division, with a 21% gain.
Aircraft engines and technical products and services each had an 18% profit increase, while earnings at GE Capital, the company’s financial services unit, rose 16%.
At television network NBC, profit was up 10%.
The only unit to show a decline was industrial products and systems, where profit fell 15% in the quarter.
Profit at GE’s appliances division was flat.
Separately Wednesday, GE’s appliances division suffered another blow with the announcement that its general manager, Linda Goodspeed, had quit to be president of an Internet company.
Goodspeed, who was in charge of operations, product development, manufacturing, procurement and marketing, joined PartMiner Inc., an online provider of content, technology and procurement services, PartMiner said.
“I wanted a more creative growth environment,” Goodspeed said.
Slower economic growth has some analysts cutting profit forecasts for General Electric this year. Credit Suisse First Boston analyst Michael Regan cut his forecast Wednesday to $1.45 from $1.50 a share, excluding Honeywell. Regan maintained his “buy” rating on the stock.
General Electric’s businesses most closely tied to swings in the economy include appliances, broadcasting, plastics, lighting and motors, analysts said.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
AIRLINES
* AMR Corp., parent of American Airlines, said fourth-quarter profit fell 36% to $56 million, or 34 cents a share, because of storm-related flight cancellations and higher fuel costs, but the results beat forecasts of 30 cents. Sales rose 8.3% to $4.86 billion, helped by increases in passengers and fares.
* America West Holdings Corp., parent of America West Airlines, posted a fourth-quarter loss of $32.1 million, or 95 cents a share, much deeper than the 44-cent loss analysts anticipated, as fuel costs rose and it canceled flights because of winter storms and a reorganization of its maintenance procedures. The company had earnings of $20 million, or 52 cents, in the year-earlier quarter. Sales edged up 0.7% to $573 million.
* Continental Airlines Inc. bucked a mostly downward trend in the airline industry, posting a 31% rise in fourth-quarter profit to $38 million, or 61 cents a share, beating expectations of 58 cents, on strong passenger revenue growth. Sales grew 13% to $2.43 billion.
* US Airways Group Inc. reported a fourth-quarter loss of $89 million, or $1.33 a share, much deeper than the $1.05-a-share loss analysts expected. The carrier blamed higher fuel costs and competition, and a glut of capacity, from low-cost airlines and major network carriers. Revenue rose 10% to $2.36 billion.
FINANCIAL SERVICES
* Bank One Corp. posted a fourth-quarter loss of $512 million, or 44 cents a share, instead of an expected profit of about the same amount, amid rising loan losses, charges and reserves for bad loans. The bank had posted profit of $411 million, or 36 cents, in the year-ago quarter. Among the huge charges that resulted in a loss, Bank One increased its allowance for possible loan defaults by $1 billion. * City National Corp., known as the banker to Hollywood movie stars, said fourth-quarter profit rose 18% to $33 million, or 68 cents a share, matching analyst forecasts, on higher deposits and investment management fees. Average deposits at Beverly Hills-based City National, which topped $9 billion in assets for the first time, rose 25% to $6.9 billion.
* FleetBoston Financial Corp. posted a 6.6% increase in fourth-quarter profit to earn $774 million, or 84 cents a share, boosted by strength in its traditional businesses of retail and small-business lending.
* J.P. Morgan Chase & Co., formed when Chase Manhattan Corp. bought J.P. Morgan & Co., said fourth-quarter profit fell 65% to $763 million, or 37 cents a share, hurt by investment losses in its venture capital unit as the stock market plunged. Wall Street had expected the bank, which warned of lower results last month, to earn 45 cents a share. Operating revenue fell 12% to $7.57 billion, while expenses rose 24%. J.P. Morgan Chase also said trading revenue fell 14% to $1.27 billion.
OTHER INDUSTRIES
* Ameritrade Holding Corp. said its fiscal first-quarter loss widened to $23 million, or 13 cents a share, from $22 million, or 12 cents, as operating expenses rose 14%. The online brokerage said revenue grew 13% to $148 million, with commission revenue up 5.8% to $82 million.
* Boeing Co. said fourth-quarter profit rose 36% to $877 million, or $1.01 a share, far exceeding analyst expectations of 91 cents, as it squeezed more cash out of its sprawling aerospace businesses. Revenue declined 3% to $14.7 billion, hurt by lower deliveries of its commercial jets. Boeing said research and development spending surged to $974 million from $315 million.
* Harley-Davidson Inc. said fourth-quarter earnings rose 26% to $93.9 million, or 31 cents a share, beating estimates of 29 cents, as the motorcycle maker’s revenue grew 14% to $756 million. The company also boosted its 2001 production target.
* Visx Inc., the leading maker of laser eye surgery equipment, said fourth-quarter profit dropped 32% to $17.5 million, or 17 cents a share, and warned that earnings in the first quarter and full-year 2001 will miss analyst forecasts. Sales plunged 43% to $42.5 million on slowing demand for surgery and lower fees from doctors. Analysts expected earnings of 16 cents, revised down from 20 cents in December, when the company issued a profit warning.
Bloomberg News was used in compiling this report.
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Earnings Reports
A sampling of companies reporting quarterly earnings Wednesday, ranked by year-over-year earnings-per-share (EPS) growth, compiled by First Call/Thomson Financial.
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Analysts’ % above/ Year- Year- Ticker est. Actual below ago over-year Company symbol EPS EPS estimate qtr. % change Sanmina SANM $0.32 $0.34 +6% $0.14 +143% KLA-Tencor KLAC 0.55 0.57 +4 0.26 +119 Extreme Net EXTR 0.11 0.11 0 0.06 +83 Kinder Morgan KMI 0.41 0.43 +5 0.25 +72 Mercury Int. MERQ 0.24 0.28 +17 0.17 +65 Allegheny ATI 0.32 0.32 0 0.22 +45 Tyco TYC 0.56 0.57 +2 0.46 +24 State Street STT 0.92 0.90 -2 0.73 +23 Synovus SNV 0.24 0.26 +8 0.22 +18 Auto Data ADP 0.36 0.36 0 0.31 +16 Household HI 1.03 1.03 0 0.92 +12 Summit Bancorp SUB 0.77 0.79 +3 0.73 +8 Biogen BGEN 0.46 0.47 +2 0.44 +7 SouthTrust SOTR 0.72 0.73 +1 0.69 +6 Willamette WLL 0.74 0.78 +5 0.75 +4 Wachovia WB 1.26 1.26 0 1.30 -3 Jefferies JEF 0.50 0.52 +4 0.56 -7 Citrix CTXS 0.15 0.16 +7 0.19 -16 Delphi DPH 0.32 0.36 13 0.48 -25 Eastman Kodak EK 0.68 0.68 0 1.27 -46
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Notes: NM = not meaningful. A loss in any period makes percentage change not calculable.
Year-over-year growth and percentage changes are based on earnings-per-share figures and may differ from percentage changes based on total profit.
For more information on First Call, check www.firstcall.com.
