GE stymied by 25 per cent slump in Q3 oil and gas revenue
By Alwyn Scott
NEW YORK, Oct 21 (Reuters) – General Electric Co beat analyst profit forecasts in the third quarter, but revenue growth remained sluggish, prompting GE to scale back expectations for full-year revenue and profit on Friday, sending shares sharply lower.
The industrial giant’s adjusted profit jumped 10 per cent to 32 cents a share, exceeding the 30 cents that analysts had estimated on average, according to Thomson Reuters I/B/E/S.
GE raised its full-year target for cash returned to shareholders to $30 billion from $26 billion and noted it had returned $25 billion in the first three quarters.
But slow economic growth, particularly in the oil and gas business, weighed on revenue. Organic revenue, which excludes growth from acquisitions, grew 1 per cent in the quarter.
The company’s shares were the biggest decliner on the Dow Jones Industrial Average index, falling 2 per cent to $28.48 in early trading on the New York Stock Exchange.
Analysts had been looking for GE to report stronger revenue growth after a weak first half, but that was stymied by a 25-per cent slump in oil and gas revenue in the quarter.
Investors were skeptical that GE’s organic revenue growth could hit 5 per cent in the fourth quarter, Sanford C Bernstein analyst Steven Winoker wrote in a note.
Anemic third-quarter growth “again calls into question the company’s ability to hit the 5 per cent” target, he said.
Company officials were more sanguine. Cost cutting in oil and gas and other businesses and a diminishing drag from foreign exchange translation should allow GE to deliver $2 a share in adjusted earnings in 2018, Chief Executive Officer Jeff Immelt said on a conference call.
While analysts expect second-half growth of about 15 per cent in the power business, GE’s largest division, power revenue grew just 7 per cent in the third quarter.
GE trimmed its full-year revenue forecast to flat to 2 per cent growth, down from 2 per cent to 4 per cent growth.
It narrowed its adjusted profit forecast to between $1.48 and $1.52 a share, compared with the $1.45 to $1.55 a share forecast at the end of the second quarter.
The company lifted its cash flow outlook, which it said allowed the boost in share buyback plans by an additional $4 billion. It now expects free cash flow and dispositions to total at least $32 billion, up from a range of $29 billion to $32 billion it forecast at the end of the second quarter.
GE’s net income from continuing operations rose to $2.10 billion in the third quarter ended Sept. 30 from $1.97 billion a year earlier. Earnings per share from continuing operations rose to 23 cents from 19 cents.
Total revenue rose 4.4 per cent to $29.27 billion.
(Additional reporting by Rachit Vats in Bengaluru; Editing by Bernadette Baum)