Shortly before the sound of the opening bell on October 16, one of the country’s largest companies, General Electric Co. (GE) affirmed that the company’s profits during the 3Q retreated from last year’s totals. The reduction in net earnings was attributed to the company’s financial unit, which pushed earnings lower by more than 44%.
During the recent period, GE posted a net profit of $2.4B, or $0.23 per share, in contrast to the prior year’s earnings of $4.3B, or $0.43 per share. Results were greatly affected by the company’s GE Capital division, which loans money to a wide variety of businesses, including credit card companies and shopping center operators.
In all, GE Capital posted an 87% decline in revenues during the quarter, from $2B in profits the year before to $263M this year. The division’s overall revenues during the period plummeted as well, falling from $17.3B to $12.1B, a decrease in sales of nearly 30%.
Quarterly revenues also came in below last year’s totals, falling from $47.23B to $37.8B, a nearly 20% decline year-over-year. Like nearly every other company operating within the U.S., the economic downturn has taken a substantial toll on profits and sales over the past two years.
Analysts, within the industry, were looking for the conglomerate to record a quarterly profit of $0.20 per share on total revenues of $39.5B.
Jeff Immelt, GE’s Chairman and CEO, commented on the company’s results, “While it remains a tough environment for GE Capital, we are seeing signs of stabilization. Every segment at GE Capital was profitable with the exception of real estate, which is experiencing a tough environment but where we believe the risks are well understood and manageable.”
Looking further inside the company’s reports, sales generated from goods and services amounted to $25.14B, down 14% from last year’s tally of $29.16B. Financial Services saw a 30% decline in revenue, from $17.53B to $12.22B. GE’s Lending and Leasing unit saw a 28% drop in sales, while its Consumer revenues faltered by 26%.
The company’s Real Estate and Energy Financial Services each witnessed a decline in revenue generated, as sales fell 42% and 62% respectively. Additionally, revenue within GE’s Commercial Aviation Services decreased 9% from last year’s totals.
Furthermore, GE’s Energy Infrastructure witnessed sales dip 9% year-over-year to $8.92B, while the Technology Infrastructure unit fell to $10.21B, an 11% decline. The Capital Finance segment plunged 30% to $12.16B. On a profit basis, GE’s Energy unit saw an increase in net earnings of 11% to $1.58B, while the Technology division witnessed an 8% decline in profits to $1.75B.
During the 3Q, GE reported a decrease in overall costs and expenses, falling from $42.1B a year ago to $35.8B, a drop of nearly 15%. In a year-over-year basis, General Electric reported a tax benefit of $484M during the quarter, compared to a payment of $539M related to income taxes.
Through the first nine months of the year, GE generated net profits of $8.01B, or $0.73 per share, versus last year’s nine-month tally of $13.7B, or $1.37 per share, a drop in net earnings of almost 42%. Overall revenues retreated as well, falling from $136.3B to $115.35B, a decrease in revenue of more than 15%.
Immelt later added, ”We are well positioned in the markets and geographies that will grow in the future. We have successfully navigated through the financial crisis and are preparing GE Capital to be a smaller, more focused franchise. GE is well positioned in this reset economy.
With the final trading session of the week concluded, shares of General Electric slipped more than 4% by the close, losing $0.71, to end the day at $16.08 per share. Over the course of year, the company’s stock price has traded within a relatively wide range, reaching a high of $21.04 per share, while slipping as low as $5.87 per share.
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