NEW YORK — General Electric's first quarter results were dragged down by deteriorating economic conditions in Europe, highlighting the danger that the region's struggles still pose to the global economy.
GE CEO Jeff Immelt said he expected results in Europe to be bad in the quarter – and they were worse. Revenue from the region fell 17 percent compared with last year.
"We planned for Europe to be similar to 2012, down again, but it was even weaker than we expected," Immelt said in a call with investors.
While GE's results were roughly what analysts expected and Immelt said the company remained on track to meet its financial goals for the year, his gloomy comments about Europe and the weak performance of the company's core industrial operations sent GE shares tumbling.
GE shares dropped 92 cents, or 4 percent, to close at $21.75 Friday.
This even though the company's earnings rose in the first quarter, helped by the sale of NBC Universal and increased profit from selling aircraft engines and transportation equipment. GE reported net income of $3.5 billion, or 34 cents per share, on revenue of $35 billion. During last year's first quarter, GE earned $3 billion, or 29 cents per share, on $35.2 billion in revenue.
Adjusted to reflect earnings only from continuing operations, GE earned 35 cents per share. That matches what analysts surveyed by FactSet expected. The analysts expected slightly lower revenue of $34.5 billion.
But sales from the company's core industrial equipment and services divisions – the divisions GE are counting on to deliver growth – fell 6 percent, and profit fell 11 percent.
Immelt said he thought the first half of this year would be difficult, but some customers delayed purchases and revenue came in about $200 million lower than he had hoped. He expects those customers to come back later in the year, and help improve the company's performance.
That's not what investors wanted to hear. "Investors want to see results now," said Christian Mayes, an analyst at Edward Jones. "They don't like the whole `wait for the second half of the year' approach."
Europe's struggles hit GE's sales of power generation and water treatment equipment especially hard. Revenue for that division fell 26 percent in the quarter, and profit fell 39 percent.
Profits in the oil and gas segment and GE's tiny energy management division also slipped in the quarter, offsetting profit gains in aviation, healthcare, transportation and home and business appliances.
"It's a big company and it takes a lot to get it firing on all cylinders," Mayes said.
The company's sale of NBC added earnings of 8 cents per share, while profit rose 9 percent at GE Capital, the company's finance arm.
GE is in the midst of shaping itself into a more focused conglomerate that sells and services industrial equipment and appliances. It is shedding divisions such as NBC Universal and shrinking its banking operations. GE sold its 49 percent of NBC Universal to Comcast for $16.7 billion in the first quarter. Earlier this month, GE announced an agreement to buy the oilfield equipment maker Lufkin Industries Inc. for $3.1 billion, as part of a push to grow its oil and gas equipment division.
Orders for oil and gas equipment rose 24 percent in the first quarter. Orders for aviation equipment, powered by a new jet aircraft engine, rose 47 percent.
But GE is not expecting any growth this year from two divisions that make up half the company's revenue – power and water and GE Capital. That will make growing the company as a whole difficult.
Immelt said in order to hit the company's profit targets for the year, it will have to aggressively cut costs throughout the year.
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