GE announced today first quarter 2008 earnings from continuing operations of $4.4 billion with $.44 per share, down 8% from first quarter 2007. First quarter 2008 net earnings were $4.3 billion or $.43 per share, down 2% from first quarter 2007. First quarter revenues from continuing operations were $42.2 billion, up 8%.
“Demand for our global Infrastructure business remained strong, but our financial services businesses were challenged by a slowing U.S. economy and difficult capital markets,” GE Chairman and CEO Jeff Immelt said. “While we are disappointed with our results, the fundamentals of our businesses are strong.
“Infrastructure had a solid quarter, growing revenues 23% and earnings 17%,” Immelt said. “Oil & Gas, Energy, Transportation, and Aviation all generated double-digit profit growth – with no signs of slowing. Infrastructure orders increased 12%, and we added more than $3 billion in backlog since last quarter."
Total orders were $24 billion, up 8%. Major equipment orders grew 11% to $12 billion. Major equipment backlog was at $52 billion, an increase of 41%. Services orders were up 5%, and CSA backlog stood at $110 billion, an increase of 16% year-over-year.
“Our focus on globalization has helped sustain the Company during the U.S. slowdown. Global revenues grew 22%, with strength in virtually every business,” Immelt said. “Developing country growth was 38%, and 14% in developed countries outside the U.S.
“Nevertheless, we failed to meet our expectations. Our primary shortfall was a decline in financial services earnings. We knew the first quarter was going to be challenging, but the extraordinary disruption in the capital markets in March affected our ability to complete asset sales and resulted in higher mark-to-market losses and impairments," Immelt said. "Our inability to complete these asset sales and higher mark-to-market losses and impairments impacted earnings by $.05 per share versus plan.
“Commercial Finance and GE Money remain in good shape and still earned $2.2 billion in a tough market. Our balance sheet is strong, portfolio quality is stable and we are originating business at high margins.
“Our other industrial businesses had mixed performances. NBC Universal grew segment profits 3%, for its sixth straight quarter of profit growth,” Immelt said. “In the Industrial segment, we had strong performance in Enterprise Solutions, with profit up 15%, partially offsetting a difficult U.S. appliance market. Healthcare earnings were impacted by a difficult U.S. environment and continued regulatory shipping restrictions on the surgical supplies business.
“In light of what we have seen in the first quarter, we have revised our earnings outlook for the full year to protect investors by reflecting a slower economy and assuming capital markets remain challenging,” Immelt said. “We are lowering our full-year EPS guidance to $2.20-2.30 from continuing operations reflecting growth of 0-5%. As a part of this guidance, we expect our industrial earnings to grow 10-15% and financial services earnings to decline 5-10%. This range encompasses any portfolio actions we have announced. Consistent with this range, our second quarter 2008 guidance is $.53-.55 EPS.”
First-Quarter 2008 Financial Highlights:
Earnings from continuing operations were $4.4 billion, down 12% from $4.9 billion in the first quarter of 2007. EPS from continuing operations were $.44, down 8% from last year’s $.48. GE’s Infrastructure business’ strong double-digit earnings growth for the quarter was offset by double-digit decreases at Commercial Finance, GE Money, Healthcare, and Industrial.
Including the effects of discontinued operations, first quarter net earnings were $4.3 billion ($.43 per share) in 2008 and $4.6 billion ($.44 per share) in the first quarter of 2007.
Continuing revenues grew 8% to $42.2 billion. Financial services revenues grew 3% over last year to $18.1 billion. Industrial sales were $24.2 billion, an increase of 12% from first quarter of 2007.
Cash generated from GE’s operating activities in the first three months of 2008 totaled $4.9 billion, down 34% from $7.3 billion last year, reflecting a $2.7 billion decrease in GE Capital Services’ dividends due to the non-repeat of a special $2.7 billion dividend from the sale of Swiss Re common stock and GE Life in the first quarter of 2007. The Company had solid industrial cash flow from operating activities of $3.7 billion, an increase of 8%, for the quarter, and is on track to reach its goal of $23 billion for the full year. Return on total capital was 18.1%.
“We take full accountability for our performance and are making the right operational adjustments for this environment," Immelt said. "The Company’s business fundamentals are solid with strong global growth led by Infrastructure, robust orders and increasing backlog, a ‘Triple-A’-rated balance sheet, healthy cash flow, and disciplined capital allocation.”
GE will discuss preliminary first quarter results on a conference call and Webcast at 8:30 a.m. ET today. Call information is available at www.ge.com/investor, and related charts will be posted there prior to the call.
GE (NYSE: GE - News) is Imagination at Work -- a diversified technology, media and financial services company focused on solving some of the world’s toughest problems. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, and media content, GE serves customers in more than 100 countries and employs more than 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com.
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