General Electric Co, the world's largest company by market value, said first-quarter net income rose 20 percent, led by higher profits at its jet-engine and financing businesses.
Net income increased to US$2.9 billion, or US$0.30 a share, from US$2.5 billion, or US$0.25, in a year-earlier period that included a US$1 billion writedown of acquisitions. Sales last quarter fell about 1 percent, the company said in a statement.
GE is still anticipating slow economic growth and product price deflation, and will rely more on its finance businesses, which lend money to companies that need to buy items such as airplanes and extends credit to consumers.
Chief Executive Jeff Immelt said 48 percent of profit this year will come from the finance businesses, which contributed about 38 percent a year ago.
"That does potentially cause investors some angst as they look at how do you value GE," William Batcheller, who helps manage US$1.1 billion at Armada Funds and holds 635,000 General Electric shares, told Bloomberg Radio. "Financial companies generally don't carry as high a multiple as industrial ones."
GE said second-quarter profit will drop to US$0.37 to US$0.39 from US$0.44 a year ago. Full-year profit will still rise to US$1.55 to US$1.70 per shar as forecast, the company said.
"It's a range that you can drive a truck through," said Brian James, an analyst at Loomis Sayles & Co, which holds about 4.7 million General Electric shares.
Other analysts including Davidson Investment Advisors' Matt Dhane, whose firm owns about 1 million General Electric shares, said they were concerned about whether earnings are dependable.
The company's first-quarter revenue fell to US$30.3 billion from US$30.5 billion partly because of lower gas-turbine sales.
Excluding costs related to an accounting change, profit also fell to US$0.32 a share from US$0.35 a year earlier, matching the estimates of analysts surveyed by Thomson Financial.
"That was one of our concerns, on the quality of earnings and just the fact that the earnings line was so smooth," Dhane said. "Definitely, earnings and accounting procedures are being looked at much more closely."
Higher oil prices, weak consumer spending, less air travel, and lower plastics sales would put 2003 earnings closer to US$1.55, Chief Financial Officer Keith Sherin said in a conference call.
The company can meet the high end of its forecast if oil prices drop, there's an increase in service contracts or there are more acquisitions and cost cutting than anticipated, he said.
"That was a surprise to us, quite frankly, that they kept that guidance and that probably suggests that management is looking for an improvement in the economy," Batcheller said.
A survey of corporate leaders released this week by Business Roundtable, a group of chief executives from 150 of the largest US companies, projects US economic growth of 2.2 percent this year. That's a more pessimistic outlook than economists have.
General Electric, based in Fairfield, Connecticut, is viewed as an economic barometer because its units sell to consumers and manufacturers. First-quarter income from selling appliances, plastics, insurance and power systems fell.
Profit at the aircraft-engines unit rose 13 percent even as sales fell because of more expensive service contracts and spare parts.
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