GE Sales Miss Estimates as Energy Divisions Post Declines

  • Revenue tumbles 16% in oil and gas as crude prices plunge
  • Divestiture plan for GE Capital runs ahead of schedule

General Electric Co. missed analysts’ sales estimates as a sluggish global economy hammered revenue in the renewables and oil-and-gas segments.

Fourth-quarter adjusted sales of $33.8 billion fell short of the $35.9 billion expected by analysts surveyed by Bloomberg. It was the seventh time in the past eight quarters that revenue has missed estimates. GE’s shares declined.

“We’re seeing a lot of economic volatility but there’s still enough business out there for GE to hit its goals,” Chief Executive Officer Jeffrey Immelt said Friday on a conference call with analysts. “We’re committed to our 2016 framework in the face of macroeconomic volatility.”

Immelt is grappling with global headwinds and a decline in crude-oil prices as he reshapes GE around industrial manufacturing and data analytics. The company moved forward in the quarter to shed the bulk of its finance operations and closed the acquisition of Alstom SA’s power business, deepening its bet on energy markets.

GE declined 1.2 percent to $28.24 at the close in New York, the second-sharpest decline in the Dow Jones Industrial Average. The stock gained 23 percent gain last year.

Revenue in the oil and gas unit dropped 16 percent and profit fell 19 percent as GE navigated a rout in crude prices, the company said in a statement. The global Brent benchmark for oil has plunged over the past 18 months to about $30 a barrel, this week touching the lowest level since 2003.

Sales fell for half of GE’s manufacturing units, including a 16 percent drop in the new renewable-energy segment. Across the industrial divisions, sales and operating profit fell 1 percent on an organic basis.

‘Messy Quarter’

The results reflect “a messy quarter,” Nigel Coe, a Morgan Stanley analyst who rates GE equal weight, said in a note. “This will be a tough quarter across the board for industrials,” he said.

GE’s power business grew considerably during the quarter with the acquisition of Alstom’s installed base of gas and steam turbines. Sales rose 3 percent in the power unit.

“On balance, we like what we see in Alstom,” Immelt said.

The expansion of GE’s industrial operations, with products including locomotives, oilfield equipment and jet engines, contrasts with a pullback at GE Capital. The lending unit was so large it imperiled its parent during the financial crisis. GE closed $104 billion in finance-asset sales in 2015, ahead of the company’s expectations.

On Track

GE Capital is on track to apply this quarter to shed its status as a systemically important financial institution, GE said. With the lending business shrinking, the unit’s fourth-quarter sales fell 11 percent.

The portfolio overhaul gained urgency during the quarter as Nelson Peltz’s investment firm disclosed holding a $2.5 billion stake in GE. Trian Fund Management LP said it supported the GE Capital divestitures and pushed for Immelt to follow through on his broader plan to boost margins.

GE plans to relocate to Boston, ending a four-decade stint in Fairfield, Connecticut, a decision announced last week that’s intended to help streamline corporate headquarters and improve the company’s ability to recruit software engineers.

GE reached a deal last week to sell its home-appliances unit to China’s Qingdao Haier Co. for $5.4 billion after scrapping an earlier deal with Electrolux AB.

Fourth-quarter adjusted profit was 52 cents a share, topping the 49 cents predicted by analysts. Industrial margins, a key measure of the strength of GE’s business, rose 0.8 percentage point to 18.3 percent excluding gains and restructuring.

Operating earnings are forecast at $1.45 to $1.55 a share this year, Immelt said, reaffirming an earlier projection. Organic revenue is expected to rise as much as 4 percent.

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