Behind GE's weak earnings

We often think of General Electric as a company that makes jet engines and owns NBC, but much of the business involves financial services. As in making loans. As in, well, you know. CEO Jeff Immelt said that last month's "extraordinary disruption in the capital markets affected our ability to complete asset sales and resulted in higher mark-to-market losses and impairments." In English, that means GE couldn't make loans because the money that's normally available just wasn't there. “Why should it be better off than Merrill Lynch or Citigroup or anybody?" George Feiger, CEO of Contango Capital Advisors, told Marketbeat. Wall Street may have been prepared for weak results at the major banks, but not GE. Earnings per share fell to 44 cents; analysts polled by Thomson Financial expected 51 cents. For such a widely watched stock, that's a huge difference. Citigroup analyst Jeffrey Sprague called the results "the biggest, most overt miss we can recall in 16-plus years of coverage." From the WSJ:

The first-quarter results and profit forecasts sent shockwaves across the investment community, resulting in analysts slashing not just their earnings estimates on GE but also their investment ratings on the stock. Credit Suisse analyst Nicole Parent -- who along with Goldman's Mr. Dray cut her investment rating on GE's stock to neutral -- wrote to clients "it is shocking to us how weak results were across the portfolio." She said that while cutting the rating "after the fact is far from ideal .. the magnitude of the miss coupled with the disappointing results across the board within the manufacturing biz makes it tough to defend here if we're intellectually honest."

Meanwhile, the NBC Universal side of GE had a 3 percent increase in profit, well below the company's target of 5 percent to 10 percent. GE blamed the results on a weak local advertising environment, where ad spending fell 11 percent, despite heavy spending on political ads. (Reuters)