General Electric delivered operating earnings of $0.39 per share, which were ahead of expectations, though the industrial operations were notably weak, offset by strength in GE Capital and better corporate cost management.
Industrial operating earnings were down 11% versus the first quarter of 2012, offset by corporate cost reductions, gains from the NBC Universal sale, and contributions from GE Capital. While management indicated that the power and water result was in line with their expectations, we had not anticipated a year-over-year decline in revenue of 26% and a 3.2% operating margin drop in our forecast.
The company still expects profit from that segment to be flat in 2013 relative to 2012, which is a tall order and puts pressure on the back half of the year. That said, the remainder of the industrial portfolio performed in line with our expectations, though continued weakness in Europe and the United States dampened growth.
This quarter’s result was markedly mixed across business segments and while we could point to the diversified business model helping to stabilize bottom-line results, the fact that the core portfolio seemed to underperform and the ancillary businesses outperformed gives us caution over the coming quarters. Analysts continue to think GE’s collection of industrial businesses are positioned well for long-term growth, but the near-term uncertainty in this portfolio may keep management from making other major portfolio moves.
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