General Electric Co said it expects profit at its industrial businesses to be flat to up 5% next year, boosting its shares 6% on hopes that gains in heavy-equipment manufacturing would help offset persistent troubles at its finance operation.
The biggest US conglomerate said profit at its NBC Universal media business would be flat or down slightly and repeated that GE Capital would record $5 billion in profit next year, down from a targeted $8 billion this year.
“For people of my generation, this is the toughest environment we've ever seen,” Jeff Immelt, chief executive of the Fairfield, Connecticut-based company, told investors.
GE broke with past practice and did not provide a numerical per-share profit target for the year.
But the world's largest maker of jet engines and electricity-producing turbines said it could weather the spreading global recession in part because its industrial businesses produce streams of recurring revenue from servicing equipment they have already sold.
Investors said they were pleased with the forecast. GE's stock closed up 5.7%, or 97 cents, at $17.92. The shares have shed about 54% this year, worse than the 40% drop in the benchmark S&P 500 Index.
“They're looking for organic growth of 2% to 3%, which is pretty good in this environment,” said Perry Adams, vice president and portfolio manager at Michigan-based Huntington Private Financial Group, which owns stock in GE.
Mike McGarr, a portfolio manager who owns GE stock at Becker Capital Management, in Portland, Oregon, said the market was expecting a more downbeat outlook.
“Some people were prepared for something even worse and maybe that's not panning out,” he said.
Raw materials costs, a drag on GE profits in recent years, are falling and should boost margins next year, Immelt added.
But he said the struggling global economy could hurt its backlog of orders.
“It's not like every unit in backlog is going to be shipped, but it's great to come into this with a $170 billion backlog,” he said.
Immelt repeated the company's forecast for 2008 earnings of $1.78 to $1.84 per share and said he expected profit at GE's NBC Universal media unit to be flat to down slightly next year.
GE told investors earlier this month the fourth quarter had been tougher than anticipated and cut its profit target to a range of 50 cents to 52 cents per share after earlier hoping to earn as much as 65 cents a share.
GE has lost more than half its market value since Immelt took the reins in September 2001, falling from more than $400 billion then to about $168 billion today.
Industrial heavyweights including 3M Co, United Technologies Corp and Honeywell International Inc have warned Wall Street that profit could fall next year as demand slows around the world and the recovery of the US dollar kicks away a prop that had boosted their profit margins early this year.
GE's businesses also include commercial lending, running the NBC Universal media business and making products ranging from big-ticket medical imaging machines to light bulbs.
In heavy equipment - its most reliable business, which the company is refocusing on - GE's competitors include a lineup of some of the world's largest companies, including Swiss engineering group ABB Ltd, French industrial group Alstom SA and German conglomerate Siemens AG. (Reuters)