GE’s Update Lacks Nasty Surprises Compared To Peers (GE)

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General Electric Co. (NYSE: GE) is providing its scheduled GE Capital update.  GE sees fourth quarter earnings at $0.50 to $0.52 EPS range rather than the $0.50 to $0.56 EPS range previously offered.  It also said that it is maintaining its dividend of $1.24 annualized for 2009.  There is actually more to this presentation that meets the eye.

GE Capital will earn $8 billion in 2008 and due to shrinking itsportfolio and taking its leverage down .  That  give it a framework for $5billion in 2009 earnings.  It does expect a return to double-digitearnings in 2010.  So there is a drop expected in 2009, but this isstill earnings and the drop is actually better than many peers who arenow operating at losses or very low profits.

GE also said that the entire company will earn over $19 billion in 2008 before charges and more than $18 billion after charges.

GE’s CFO Keith Sherin said that the company is committed to maintainingits Triple-A rating and is taking actions to reflect the currentmarket.  "Our plans reflect a very difficult environment.However, GE Capital expects to deliver exceptional relative performancein 2008. For 2009, we are targeting to reduce leverage to 6:1, loweroutstanding commercial paper balance to $50 billion and reduce ouroverall funding needs," Sherin said.

GE was down yesterday after an analyst report warned that the companycould use today to bring down expectations.  While that is somewhat thecase, these numbers are probably better than many were bracing for.Again, this will be a glass half-full versus a glass half-empty presentation depending upon how you view the world.  While this would be a glass half-empty to us in normal times, we are not in normal times and the company is still holding up much better than peers on the operations side.

Shares are up over 2.5% at $15.91 in pre-market trading with an hour tothe open.

UPDATE (8:45 AM EST) MOODY’s has already just said GE financial policies are permanent and supportive of ratings and that the ratings for units were affirmed as AAA and the outlook is stable.

Jon C. Ogg
December 2, 2008