GE profits up but power group continues to lag

General Electric posted quarterly results that topped expectations on Friday, as earnings from aviation, healthcare and transportation offset weak power and oil-and-gas profits.

Profit at GE’s power business fell 38 per cent on a 9 per cent decline in sales; orders dropped 29 per cent.

“The industry continues to be challenging and is trending softer than our forecast,” GE said of the power business.
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GE also affirmed its forecast for 2018 earnings and cash flow, and said it expects to book as much as $10 billion in proceeds from divesting industrial assets this year. Those comments eased concern that GE would post poor results.

GE earned an adjusted 16 cents per share, up from a restated 14 cents a share a year earlier. Analysts on average had expected 11 cents a share, according to Thomson Reuters. GE recently restated 2017 results to reflect changes in accounting standards.

Fiona Cincotta, a senior market analyst at told Power Engineering International, “A feared downgrade hasn’t materialised and the extent of cost reduction is commendable, but it’d still take a brave soul to declare the worst is behind GE.”

“The power business continues to suffer from lax demand for gas-fired generators, as interest in renewable energy such as wind and solar grows. GE, of course, is also a big supplier of wind turbines. But margins in that market are getting crunched by competition and ever-shrinking government subsidies for wind farms.”

“More consolidation in the wind-turbine market is highly likely and GE may well be sizing up targets despite current constraints on its balance sheet.”

“The ability to pay higher dividends won’t be helped by a decision to set $1.5bn aside to cover potential liabilities from alleged sub-prime mortgage violations–a figure considerably higher than what the market was expecting.”

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