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The company most associated with meeting its quarterly numbers is no longer going to be forecasting them.
At General Electric’s annual investor outlook meeting, held in the same studio where GE unit NBC films the show Saturday Night Live, CEO Jeffrey Immelt provided only a “framework” for 2009. The company expects to earn $5 billion in its GE Capital unit and says its industrial group will see growth that’s between flat and 5%. No earnings-per-share forecasts or quarterly guidance were offered, nor will be.
Whether the move was prompted by the uncertainty in the economy or, as cynics are sure to note, the fact that Immelt missed or revised his numbers twice this year, at least some analysts applauded it. “It makes perfect sense” given the size of the company, said Credit Suisse analyst Nicole Parent.
The shift away from earnings guidance wasn’t the only change Immelt announced in today’s meeting. Uncertainty is also prompting GE to shorten its long-term incentive plan for paying executives from three to two years. And the conglomerate has now settled on running, rather than selling, its consumer & industrial unit, the iconic business that makes GE-branded refrigerators, washing machines and light bulbs. GE had announced it would sell or spin off the unit, which has been a drag on earnings, earlier this year.
The meeting highlighted a CEO still adjusting to communicating about the new normal—a recession which Immelt has called not just a cycle, but a “reset.” Ever the salesman, the marketing veteran started to call a certain segment of the company “great” before stopping himself and apologizing to the investor relations representative in the room. Like “a drug addict trying to get off” a habit, he joked, he stopped to temper his statement. “Learning how to say words like ‘framework’ is going to be difficult,” Immelt said. He even started today’s meeting by referencing the first quarter, in which GE missed its earnings guidance after Immelt had affirmed the numbers just weeks before. “I’m not going to start out today saying ‘It’s in the bag,’” he said, as the investors in the audience chuckled.
Still, Immelt did reaffirm GE’s 2008 guidance, along with the company’s commitment to its 2009 dividend and to doing what’s needed to maintain its AAA credit rating. And he spent much of the meeting laying out the tough environment the company faces. NBC Universal, in a post-Olympics, recessionary advertising year, is expected to be flat to down. GE’s health care business, Immelt said, is facing a “very tough” 2009. And while energy and infrastructure are in stronger positions, particularly with the stimulus projects being discussed by President-Elect Obama, its backlog of orders could still be vulnerable in a recession. “2009,” said Immelt, referencing its ongoing working servicing its installed equipment, “is a year when investors are going to be really happy we’re in the services business.”
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