By Scott Malone
BOSTON (Reuters) - General Electric Co
GE shares notched an 11-year low in volatile trading on Friday before recovering a 2.6 percent gain after posting a 22 percent drop in net income.
Its profit was weighed by a 33 percent fall at GE Capital, overshadowing growth at its infrastructure arms, which were buoyed by solid demand for electricity-generating turbines and jet engines.
"The global financial system is tough," said Chief Executive Jeff Immelt, on a conference call with investors. "We try to think and do our planning just based on the fact that there's more risk, just given what's going on in the global environment."
The company, which is regarded as an economic bellwether due to the size and breadth of its operations, confirmed its 2008 earnings forecast of a profit drop of up to 12 percent.
GE posted earnings of $4.31 billion, or 43 cents per diluted share, down from $5.56 billion, or 54 cents per diluted share, a year earlier. Profit from continuing operations was down 12 percent.
The continuing operations profit of 45 cents per share matched the revised average Wall Street estimate as compiled by Reuters Estimates.
Revenue rose 11.1 percent to $47.23 billion.
"There's not a lot of warm comfort here but it's a good report," said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati. "There was nothing horrific on the finance side."
MARGIN CONCERNS
Profit margins at the company's industrial units, which also make high-tech medical imaging equipment and railroad locomotives, did not show as much lift from the recent easing in commodity costs as some investors had expected.
"Industrial margins were considerably weaker than we had expected," wrote Deutsche Bank analyst Nigel Coe, in a note to clients.
Noting that the Fairfield, Connecticut-based company spends $15 billion to $20 billion a year on raw materials, Immelt said easing costs "could help us buffer our margins" in the future."
The strongest growth came at GE's energy infrastructure unit, where earnings rose 31 percent. Technology infrastructure, including health care, rose 2 percent.
Profit at its NBC Universal media unit jumped 10 percent, but earnings at the consumer and industrial arm -- which the company aims to spin off to shareholders -- tumbled 82 percent.
COMMERCIAL PAPER 'IMPROVING'
The company has had no problems turning over its short-term commercial paper debt, but still aims to reduce its reliance on that method of financing from $88 billion at end of the third quarter to $80 billion by the end of the year, executives said.
"We really see the CP market improving right now," Immelt said. "We've had no problems with CP."
GE said it would keep its annual dividend steady at $1.24 per share next year.
The company said profit at its GE Capital unit would be down 20 percent to 30 percent in the fourth quarter. It offered no specific 2009 forecast, but plans to provide investors with those targets on December 16.
"The sigh of relief is going to last about five minutes," said Brian Langenberg, principal at Langenberg & Co. "It's still about what's going on in the world and the fact they have a lot of finance. Bank stocks were already decimated and now the insurance stocks are starting to cave, and even though these guys aren't insurance anymore if you have a lot of finance that hurts you."
Earlier this month, GE sold an additional $15 billion in shares -- including $3 billion to billionaire investor Warren Buffett's Berkshire Hathaway Inc
GE shares were up 49 cents at $19.50 on the New York Stock Exchange, above a session low of $18.40. The shares now trade at less than half their level when Immelt took the helm in September 2001.
So far this year, the company's shares have lost 48 percent of their value, a steeper drop than the 37 percent slide of the Dow Jones industrial average <.DJI>.
(Additional reporting by Nick Zieminski and Ryan Vlastelica in New York; Editing by Derek Caney)
