Friday, July 11, 2008

GE's reports second quarter earnings in challenging domestic environment

GE's second quarter earnings report came in line with expectations. The overall picture is one of a continuing difficult domestic environment, offset in large parts by global growth. At least for the first half of 2008 global growth remains exceptionally strong. Given the inflationary environment that is squeezing the margins (down 40bp for GE) for businesses the overall environment remains challenging. "Many markets and industries remain healthy, while the U.S. economy is challenged," GE Chief Executive Jeff Immelt said in a statement. The company also gives a somewhat disappointing outlook for the third quarter with profits flat to down in all its business segments.

GE 2Q 08 earnings highlights:
Industrial segments profit was down 32 percent on a challenging and difficult domestic environment (housing). US orders in this segment are down 7 percent offset by growth in Asia up 19%, Europe up 21% and Latin America up 15%. U.S. industrial revenues are down 1% offset by strong global growth in Asia up30%, Latin America up25% and Europe up21%.

GE's operating profit margins are down 40bp with C&I down 60bp equipment/service down 30bp, partially offset by price/DM inflation up 20bp.

GE's financial services business continues to experience a challenging environment with segment profits down 9%. This despite profit outside the Americas is up 5%. GE reports that US delinquencies on its loan portfolio were higher 105bp at 5.55% in 2Q08.

click to enlarge

source: GE 2008 second quarter performance

July 11, 2008

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