GE (GE) was one of the alleged last safe harbors in corporate America. The company said the credit issues facing the economy would not damage GE Financial. The conglomerate indicated that it could make its way through the downturn.
No one lied, but a lot of people at GE must have miscalculated.
Just now, GE offered one piece of good news as it cuts its guidance for the rest of the year. It will maintain its dividend. On the less positive side of the ledger, it will cut its share buyback.
GE Financial did turn out to be the rough spot at the company. The announcement about earnings said “GE now expects that its financial services businesses will earn approximately $2 billion in the third quarter, which, while impacted by current market conditions, is expected to exceed the earnings of any financial services company.” That is remarkably poor PR work. It masks bad news with a thin coat of crap.
The earnings forecast cut was not modest. It was extremely deep. GE revised its earnings guidance for the third quarter, to a range of $0.43 to $0.48 per share from $0.50 to $0.54. GE also revised its earnings guidance for the full year to $19.5 to $21 billion ($1.95 to $2.10 per share) from $22 to $23 billion ($2.20 to $2.30 per share).
The real shame of the GE announcement is that the news from the company never gets better. It always gets worse. If CEO Jeff Immelt’s tenure is marked by one thing it is a hardy optimism followed by foolish revisions.
GE lost most of its credibility earlier in the year by missing guidance for its first quarter and posting modest numbers for it second one.
Nothing the company says now can be taken seriously. Immelt has completely lost the market’s trust that anything he says is true.
Douglas A. McIntyre
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