General Electric Co. said Friday that its first-quarter earnings fell 32 percent, but the industrial and financial bellwether said it saw signs of improvement in its own results and the broader economy.
GE’s NBC Universal entertainment division posted a big drop in profits, down 49 percent to $199 million. GE plans to sell a majority stake in NBC U to cable operator Comcast Corp., a deal that is expected to close later this year.
The results from GE, one of the world’s largest companies that operates in most major segments of the economy, signals that some sectors may be in recovery from the deep recession. GE said there were positive indications in commercial aviation, freight rail and advertising.
“We saw encouraging economic signs,” said chief executive Jeffrey Immelt.
But despite the optimistic tone, GE’s earnings also underscored the major challenges the company faces as it tries to return to profit growth after a several punishing quarters.
Its GE Capital lending unit posted a profit but losses remained high in areas like commercial real estate. GE’s industrial units, which it is relying on to lead it out of the recession, also posted lower sales. And while its earnings beat Wall Street estimates, revenue was lower than analysts expected.
Company shares fell 53 cents, or 2.7%, to $18.97 at the close of trading Friday.
Eric Boyce, a portfolio at Hester Capital Management, said GE’s results suggest that the domestic economy “is out of crisis mode, but that we are in a muddled, protracted recovery.”
GE Capital has been the biggest headache for the conglomerate over the past two years, as losses on its loans soared on troubles in the home mortgage markets, consumer credit card borrowing and commercial real estate. The division’s profits fell 41 percent, though much of that was due to downsizing and a substantially lower tax credit. The loss in commercial real estate more than doubled to $403 million.
Still, GE said losses were moderating at GE Capital, with Immelt predicting that the division had “turned the corner.” GE posted a $607 million profit even with the lower tax credits — $357 million compared to $1.15 billion a year ago. GE also saw stabilization as losses and delinquencies declined in the first quarter.
Overall, GE said it earned $1.87 billion, or 17 cents per share, after deducting preferred dividends in the January-March period, down from $2.75 billion, or 26 cents per share, a year ago. Revenue fell 5 percent to $36.6 billion from $38.4 billion a year ago.
Excluding $390 million in losses from one-time items, GE’s earnings from continuing operations were $2.4 billion, or 21 cents a share. Analysts polled by Thomson Reuters expected profit of 16 cents a share on higher revenue of $37.1 billion.
GE is considered an indicator of the well-being of the broader economy. It makes industrial products ranging from light bulbs to wind turbines, and is a big lender to businesses and consumers.
As the economy sank in late 2008, so did GE. The seizure of credit markets made it hard for GE to raise money and the stress on consumers and companies led to big losses on GE loans and lower orders for its industrial businesses. GE dropped its dividend payment by 68 percent to save cash, lost its top credit rating and saw its stock price tank.
GE said Friday that the SEC has requested information on how much the company disclosed to investors about its financial situation during the crisis.
The probe was prompted by a recent book by former Treasury Secretary Henry Paulson, who wrote that Immelt called him in September 2008 to report GE was having difficulty selling commercial paper. But shortly afterward, GE reassured investors that its ability to raise debt was sound.
GE spokeswoman Anne Eisele said Friday that the company is cooperating with the SEC and that it is “entirely confident our disclosures were accurate.”
GE has billed 2010 as a year of transition to renewed growth next year.
But the first quarter results suggest that recovery may take a while to gather steam. Industrial sales were down 2 percent in the quarter on lower sales of jet engines and train locomotives, outweighing better results for products like medical imaging machines and power plant turbines.
But the loss in commercial real estate more than doubled to $403 million, an area that will remain a drag on GE’s efforts to rebound.