GE's Earnings Miss Points to Slowing U.S. Economy

GE has rarely missed its profit targets, but it delivered an unexpected 6% drop in first-quarter profits last week, mainly from sub-prime writedowns at its financial services division, but also from an overall economic malaise.


After 112 years, General Electric is the only original company remaining on the Dow.
Profits were seven cents below expectations. Before you write that off as a small number, keep in mind that GE has almost 10 billion outstanding shares!

7 cents X 10 billion = a mountain of money!

More importantly, GE warned Wall Street to tone down expectations for the rest of 2008. The company now expects to make $2.20 to $2.30 a share this year, well below the $2.43 consensus Wall Street forecast.

Those numbers mean that GE's profits will grow a measly 5% at best. And at worst, they won't grow at all. According to the company's CEO, Jeffrey Immelt,

"We are not counting on the business getting any better, vis-à-vis ... the U.S. consumer. We have actually allowed for a worsening of the U.S. consumer in our GE Money business. So I think that is the way to think about the U.S. and the U.S. economy."

Last week's numbers tend to support Immelt's argument. The University of Michigan consumer confidence index dropped to 63.2 in April, the lowest number since 1982.