General Electric Company (GE) announced earnings from continuing operations of 21 cents for the first quarter of 2010, ahead of the Zacks Consensus Estimate of 16 cents. Revenues were $36.6 billion for the quarter, down 5% from a year ago, which reflects the effects of GE Capital downsizing.
There were encouraging economic signs, including increases in airline passenger traffic and freight loadings, declines in receivables delinquencies, and growth in local advertising markets. The total value of company backlog ordering of equipment and services was constant from the prior quarter, at $174 billion.
GE Capital earned $0.6 billion in the quarter. Losses, delinquencies and non-earning assets declined in the quarter. At the same time, reserve requirements have increased. The company is initiating new business at attractive margins and its funding costs have declined.
Commercial real estate markets, however, continue to be challenging. During the first quarter, the company recorded incremental reserves related to the 2008 disposal of its GE Money Japan business, which is reflected in the financial figures concerning discontinued operations.
Industrial margins improved to 14.7%, up 30 basis points from a year ago, reflecting good performances at Energy, Healthcare and Home & Business Solutions. The company increased R&D investment by 16% in the first quarter and launched a pipeline of new products and services. Cash generated from Industrial operating activities totaled $2.6 billion in the first quarter, down 17% from $3.1 billion in the first quarter of 2009.
Total segment profit declined 16% compared with the first quarter of 2009, with 12% growth at Energy Infrastructure offset by earnings declines of 41% at GE Capital, 18% at Technology Infrastructure and 49% at NBC Universal.
Total cash and marketable securities were $111 billion, with long-term debt of $516 billion and shareholders’ equity of $115 billion.
GE has one of the best infrastructure franchises worldwide with solid organic growth rates, exposure to favorable secular trends and a large installed base supporting a growing annuity-like service business.
Infrastructure businesses from GE are helping build the energy, health, transportation and technology infrastructure of the new century. These businesses provide the products and services that help developing regions participate in the global economy, while also helping developed regions upgrade with cleaner, more efficient and better infrastructure technologies.
The company has adopted strategic imperatives to strengthen its portfolio by building strong growth platforms and generating cash from low-return businesses. Its focus remains on accelerating organic growth and achieving technical and service excellence, while building enduring customer relationships around the world.
We currently have a Neutral recommendation on GE.
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