Earnings Preview: General Electric's third quarter

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WASHINGTON -General Electric Co. is scheduled to report its third-quarter financial results on Friday before the market opens. Below is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Investors will be taking a hard look at the performance of GE's industrial businesses that make locomotives, jet engines, MRI machines and power plant turbines. The deep recession has battered the nation's demand for heavy equipment.

The company's results will also signal how sustainable the nation's fragile recovery is. GE competes in most major segments of the economy, like transportation, health care, energy and consumer products. If orders for its products improve, that could show that things are getting better. If orders are stagnant, the economy may still be in low gear.

GE's manufacturing operations are especially important since its big finance division, which once made up to half of GE's profits, is expected to struggle with losses from loans gone bad. GE is shrinking the size of GE Capital, but its problems dragged down the company's earnings in recent quarters.

Many of the losses center on GE's lending in areas like overseas mortgages and store credit cards. Analysts will pay special attention to GE's big portfolio of commercial real estate loans and holdings, a major source of concern for GE now that the market for properties such as office space is falling.

Also of interest is GE's plans for NBC Universal, which includes the NBC network, a collection of cable television channels, a movie studio and a theme park chain. GE is reportedly in talks with Comcast to sell off a large chunk of its holdings in the unit, but much of that depends on what the company's current partner, the French conglomerate Vivendi, plans to do with its 20 percent stake of NBC.

BY THE NUMBERS: On average, analysts polled by Thomson Reuters expect GE to post a profit of 20 cents per share on revenue of $40.03 billion. In the same quarter of last year, the company reported profit of 45 cents per share on revenue of $47.2 billion.

ANALYST TAKE: Analysts remain cautiously optimistic about GE's industrial businesses. Nigel Coe of Deutsche Bank predicts industrial profits could inch up 3 percent on factors like favorable pricing and GE's service work on equipment already owned by customers. Others also see some positives for GE's industrial divisions.

"The manufacturing work is at least stabilizing, if not growing," said Joel Levington, director of corporate credit for Hyperion Brookfield Asset Management in New York.

Still, GE Capital remains a concern, especially its commercial real estate unit.

"They are going to have to show some tempering of the losses," said Eric Boyce, a portfolio manager at Hester Capital Management in Austin, Texas.

STOCK PERFORMANCE: GE's shares climbed steadily throughout much of the quarter after falling to deep lows earlier this year. Company shares rose 40 percent during the three months, opening at $11.72 on July 1 and closing at $16.42 on Sept. 30. Since then, shares have traded largely flat.

2009-10-14 17:22:44