General Electric Co.'s first-quarter earnings fell 36 percent on sharply lower profits at its troubled GE Capital finance arm, but the results beat Wall Street forecasts in a glimmer of good news for the struggling company.
The earnings show that GE Capital remains a major drag on the conglomerate's profits, but also suggest that GE's strategy of weathering the economic slowdown by relying on its big industrial businesses is paying off, at least for now.
GE, which has a stake in almost every sector of the economy, from light bulbs and credit cards to windmills, on Friday reported net income of $2.74 billion, or 26 cents per share.
That was down from $4.30 billion, or 43 cents per share, a year earlier.
Earnings from continuing operations were 26 cents per share, surpassing the 21 cents forecast by analysts.
While GE's industrial sales slipped one percent to $24 billion, it posted stronger results in divisions that make power plant turbines and jet engines. That partly offset drops in its entertainment, consumer products and healthcare operations.
"GE demonstrated this quarter that we are navigating through the recession," said company CEO Jeffrey Immelt.
He said GE believes it won't have to raise new capital to prop up GE Capital, a huge business that finances everything from credit cards to commercial real estate. That business, which once comprised about half of GE's profits, has worried investors as credit and property markets seized up over the last year, fueling a steep slide in GE's share price.
GE Capital remains a major concern. Analysts pointed out that without a big boost from taxes, GE Capital would have posted a quarterly loss of $153 million in the first quarter. With the tax benefit, its earnings slid 58 percent to $1.12 billion.
Hit especially hard was its real estate business, which includes lending and holdings in offices and shopping centers. The unit posted a $173 million loss in the quarter, versus a $476 million profit a year earlier. Profits dropped at GE Capital's heavy equipment lending business, and its unit that finances energy projects.
Still, GE said that the unit is on track to turn a profit in 2009.
Total quarterly revenue, including a 20 percent drop at GE Capital, fell 9 percent to $38.4 billion, with sales down or flat in every division except GE's energy business. A broad U.S. recession has hurt many of GE's industrial operations that make products like medical equipment and household appliances.
GE said sales from power plant turbines, windmills and other energy work rose 7 percent to $8.24 billion. Sales in GE's aviation business, which makes jet engines, rose 12 percent.
Immelt said GE's operations like wind power would likely benefit from stimulus spending in the United States and globally this year. A $3 billion project to build turbines for Iraqi power plants is also expected to show up in profits.
But most segments suffered. Sales slipped 9 percent at GE's healthcare division, as hospitals hold off purchases as endowments drop and uncertainty surrounds health care reimbursement.
GE's entertainment division, which includes the NBC television network, posted a 2 percent drop in sales, due to softer advertising markets and weaker DVD sales.