GE's 1st-quarter profit rises 16% to 30 cents a share

Wall Street reacts warmly, pushing up shares by $1.43

April 13, 2001|By NEW YORK TIMES NEWS SERVICE

General Electric Co., buoyed by strong sales of gas turbines and medical systems, said yesterday that its first-quarter earnings rose 16 percent compared with results in the period a year earlier.

The profit from operations, which matched analysts' estimates, was $3.017 billion, or 30 cents a share, up from $2.59 billion, or 26 cents a share, in the quarter a year earlier. Revenue rose less than 2 percent, to $30.49 billion.

"The strengths in some of the businesses clearly offset the weaknesses in others, which is the whole reason to own a conglomerate," said Nicole M. Parent, an analyst with Banc of America Securities.

Although a one-time change in accounting rules resulted in a $444 million charge, lowering net income 0.8 percent to $2.57 billion, or 26 cents a share, none of the 13 analysts who cover General Electric were put off.

"GE remains one of the highest-recommended companies we track," said Charles L. Hill, director of research at Thomson Financial/First Call.

Indeed, investors seemed exhilarated by GE's as-expected numbers. Shares of the company rose $1.43 yesterday, to $44.70.

The rise in the stock price broke a long-standing pattern. GE shares generally rise before its earnings report as investors bet that GE will exceed its own forecast. Historically, the company meets the estimate or exceeds it by a penny - and the stock falls, as disappointed optimists sell shares.

This time, there was little optimism and thus little letdown.

GE's short-cycle businesses - those with a short time between order and delivery - are suffering with the economy. Profits at its industrial group, a potpourri including lighting systems, small motors and locomotives, plummeted 18 percent, although sales rose 4 percent - a discrepancy that many analysts say came from reducing prices to keep volume up.

Sales at GE Appliances dropped 5 percent and earnings fell 3 percent. Sales and profits were flat for GE Plastics. Advertising prices firmed a bit at NBC, but the company's much-touted XFL football program has been a ratings flop.

The long-cycle businesses have thrived. Revenue at GE Power Systems increased by 33 percent. "And their earnings essentially doubled, which certainly covers a multitude of sins in other businesses," said James N. Kelleher, an analyst with Argus Research.

Orders at GE Medical Systems gained 21 percent, while GE Aircraft Engine sales rose 12 percent.

Revenue at GE Capital Services declined by 6 percent, principally because it divested Montgomery Ward, Mortgage Services and Auto Financial Services.

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