After two fiscal 2003 earnings estimate cuts drove its stock down to five-year lows earlier in the week, General Electric
The mega-company matched third-quarter expectations, thanks largely to strong results from its NBC unit and the selling-off of its GXS Internet commerce business. It took the one-time special event to meet estimates, but the market seems to be saying, "Hey, we'll take it."
GE's revenues rose 11% to $32.6 billion, nearly enough to cover retirement payments to ex-chief Jack Welch. (Oh, we jest.) Net income grew 25% to $4.1 billion. The company kept its fiscal 2002 EPS guidance of $1.65 in place.
The performance of the different business units varied in the quarter. The plastics, lighting, and aircraft engine divisions experienced declines, while profits from sales of appliances grew 21% and NBC earnings shot up 59% compared to a year ago. The company's power systems unit grew profits 16%, down from the second quarter's stellar 66% growth.
From here, GE is facing a difficult 2003. Its third-quarter results, while certainly not horrible, really banked on the success of one or two of its more minor business units. There's still a lot of weakness floating around that's affecting the major divisions. Plus, add into that the estimate-meeting impact of the one-time sale of the Internet commerce business, and we're looking at a company that had some fortuitous third-quarter events help it out. Will it be so lucky in 2003?
GE itself recognizes that the current business climate spells trouble for 2003 unless it can keep lean and cut costs even further. Indeed, that's what CEO Jeff Immelt said today, telling investors and analysts that GE will grow next year, but that it will undertake aggressive cost-cutting moves and restructurings in order to get the job done.
For GE investors sitting on shares that are at lows not seen since Rachel Green was still sporting that shaggy 'do and Chandler and Monica were but only friends, we hope Mr. Immelt's plans for growth and efficiency work.