GE's profit rises 14% in `very tough' market

Net income increases to $2.16 billion, equaling forecasts of analysts

April 09, 1999|By BLOOMBERG NEWS

FAIRFIELD, Conn. -- General Electric Co., the second-biggest U.S. company by market value, yesterday said first-quarter earnings rose 14 percent as it wrung more profit from sales hurt by low prices for some of its products.

Net income for the No. 1 maker of jet engines and owner of the biggest non-bank financial-services company rose to $2.16 billion, or 65 cents a share, from $1.89 billion, or 57 cents, for the same quarter a year ago. Per-share results matched the average estimate of analysts polled by First Call Corp.

GE Chairman and Chief Executive Officer Jack Welch has steadily increased profit at GE even as other multinationals such as Coca-Cola Co. and Gillette Co. warn that their earnings are likely to fall below estimates.

Yet even GE, with diverse businesses and reliable revenue from service contracts, isn't immune to low prices worldwide for some industrial products, appliances, plastics and other goods.

"General Electric continues to deliver in a [revenue] environment that's very tough" for some industrial businesses, said Michael Regan, a Credit Suisse First Boston analyst.

Revenue at GE increased by just 6.8 percent, to $24.17 billion, while the Fairfield, Conn., company's operating margin widened to 16.3 percent from 15.1 percent. Operating margin measures sales less the cost of goods sold.

GE shares closed at $114, down 50 cents.

Sales and profit fell 2 percent in the appliances division, which was hurt by competitors' new products and prices that remained low.

Sales at the Industrial Products and Systems division, which includes locomotives, electrical controls and lighting, fell 1 percent.

Sales at GE's NBC television network fell 6 percent, partly because the network didn't have broadcast rights to the Super Bowl in the first quarter, the company said. Profit still rose a better-than-expected 12 percent as NBC cut costs, and profit climbed at its CNBC and MSNBC cable networks.

GE Capital's sales rose 11 percent and profit increased by 17 percent with help from acquisitions. In the quarter, GE Capital completed six acquisitions, including the $7 billion in equipment and leasing assets from Japan Leasing Corp.

Pub Date: 4/09/99

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