GE trims profit outlook on Europe weakness; stock slumps
By Ernest Scheyder
(Reuters) - General Electric Co warned of slowing profit growth in its industrial businesses due to weakness in Europe and sliding turbine sales, unnerving Wall Street and pushing its stock down in morning trading.
The conglomerate, the world's biggest maker of jet engines and electric turbines, said on Friday it expects industrial profit to rise by high single digits to double digits this year. Previously it had forecast double-digit growth.
Chief Executive Jeff Immelt blamed slumping sales of wind turbines and gas turbines for the outlook cut, as well as the weakening European economy. But he said he still expects overall earnings, which include GE Capital, to improve this year. As usual, the company did not provide a specific earnings forecast.
Of concern to Wall Street: GE will try to boost earnings by slashing $1 billion in costs this year, rather than relying primarily on sales growth.
Wall Street analysts, which earlier in the day hailed GE's better-than-expected first-quarter revenue, grew unnerved as the new outlook was disclosed on a conference call. Shares of GE were down nearly 4 percent at midday.
"The level of uncertainty in terms of their ability to meet their goals has risen a little bit," said Perry Adams, portfolio manager at Northwestern Bank, which holds GE shares.
GE expects to sell about 95 gas turbines this year, down from 133 in 2012, due to sliding electricity demand from developed markets, Keith Morin, GE's chief financial officer, said in an interview.
Profit in the power & water unit - GE's second-largest unit and the seller of wind and gas turbines - fell 39 percent in the first quarter, and results aren't expected to improve. Continued...