General Electric Co (GE) expects revenue to be flat or up as much as 5 percent next year, though its top executive said on Monday that worries about the “fiscal cliff” had hurt demand in the closing months of this year.
In the face of an uncertain economy, the largest US conglomerate said it expects to increase profit next year, but did not say by how much. Rather, chief executive officer Jeff Immelt repeated his goal of continuing to boost operating margins.
“There’s still a lot of macroeconomic volatility and we’re running our business at a lower cost rate,” he told analysts, adding that the company planned “some restructuring” as it continues to cut costs and is not counting on any improvement in the European economy any time soon.
GE expects organic revenue at its industrial units — a measure that excludes exchange-rate fluctuations and any acquisitions or unit sales — to grow by 2 to 6 percent next year, with weak sales of wind turbines partially offsetting growth in other areas.
The world’s largest maker of jet engines and electric turbines aims to boost profit margins by 70 basis points next year, an increase that would raise its operating margin to about 15.8 percent of sales.
GE forecast double-digit percentage profit growth at businesses that make equipment used in oil and gas production, railroad locomotives and appliances and lighting.
Profit at its GE Capital finance arm, which it continues to scale back, could be flat to up by a single-digit percentage.
Immelt warned investors at a meeting in New York that the slow progress of negotiations in Washington to head off a year-end “fiscal cliff” of higher taxes and government spending cuts — which could push the economy into recession next year — was taking a toll on business.
“There’s no doubt the fiscal uncertainty slowed activity in the fourth quarter of the year,” said Immelt, who is an adviser to US President Barack Obama on the economy and also a member of a coalition of top US CEOs pushing for a debt deal.
“We’re cautious about next year,” he told a small group of reporters. “But we’ve got a very well-run business.”
GE’s industrial revenue for this year, a measure that excludes the company’s sizable finance business, will be up about 8 percent, below the 10 percent target Immelt discussed with investors in September.
“We’re going to have a cost hedge in our plan in case there’s more disruption next year,” he said. “I think that’s the only smart way to do it.”
GE shares fell 0.5 percent to US$21.82 in after-hours trading.
Immelt reiterated his recent statements that GE will not pursue large acquisitions, but is instead focused on deals worth between US$1 billion and US$3 billion.
However, he allowed that it was possible the company could “creep up” to US$4 billion for the right target.
The Fairfield, Connecticut-based company no longer provides numeric, per-share profit forecasts, a practice it abandoned during the recession.
Analysts, on average, expect GE’s earnings to rise about 12 percent to US$1.69 per share next year, excluding one-time items, with revenue increasing 2 percent to US$150.57 billion, according to Thomson Reuters I/B/E/S.
GE shares have risen about 30 percent over the past year, sharply outpacing the 11 percent rise in the Dow Jones industrial average.
GE is the sole remaining original member of that widely watched group of US stocks.