GE Lowered Earnings Outlook

123jump.com Staff
25 Sep, 2008
New York City

General Electric lowered its earnings outlook for the quarter and the year and said the current difficult conditions in the financial services business are not likely to improve in the near future. The company left its dividend unchanged and suspended its stock buyback plan.

[R]9:30AM New York – General Electric lowered its earnings outlook.[/R]

General Electric lowered its earnings guidance, left its dividend unchanged and suspended its stock buyback plan. The company blamed it on the “weakness and volatility in the financial service markets.” The conglomerate revised quarterly earnings to a range of 43 cents and 48 cents a share from 50 and 54 cents a share.

GE ((GE)) lowered its annual earnings to $19.5 billion to $21 billion from $22 billion to $23 billion and earnings per share to $1.95 to $2.10 a share from $2.20 to $2.30 a share.

The company also decided to not increase its dividend and leave it at 31 cents a share and for the year at $1.24 a share through 2009. For the first time in 31 years, GE has not increased its dividend. The company still expects to earn $20 billion this year. The Financial services group is expected to earn $2 billion in the third quarter and $9 billion for the year, which will be the largest quarterly and annual earnings of any financial services company in the U.S.

Jeffrey Immelt, chief executive of GE in the last two years, has sold several businesses in the financial services group including subprime lending unit, consumer finance units in Japan, UK and Spain sold its credit card division to American Express. The company has also sold its insurance division to free up capital and fund faster growing infrastructure and industrial businesses.

GE Chairman and CEO Jeff Immelt said, “We run the company for the long term and are taking the actions expected from a Triple-A-rated company. Given the recent dramatic developments in the financial markets, we have made some tough decisions to further reduce risk and strengthen our balance sheet while maintaining our dividend. We have suspended the stock buyback to reduce GE Capital leverage.” He also said that difficult conditions in financial services are not likely to improve in the near future.

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