General Electric Co. (GE:US) fell the most in seven months after Chief Executive Officer Jeffrey Immelt failed to deliver a profit-margin forecast that he had been repeating for more than a year.
GE dropped (GE:US) 2.3 percent to $26.58 in New York, the second biggest decline among industrial companies in the Standard & Poor’s 500 Index. Profit margins at GE units making jet engines, medical scanners and locomotives expanded last year by less than the 70 basis points, or 0.7 percentage point, that Immelt set as a goal in December 2012 and affirmed last month.
The misstep comes as Immelt focuses on manufacturing growth while shrinking the company’s finance unit. Supply-chain disruptions at GE’s wind-turbine business and worse results than anticipated at the energy management division put the growth target out of reach, executives said on a conference call with analysts today.
“They didn’t quite make it and some people are going to be disappointed they didn’t hit the number,” Christian Mayes, a St. Louis-based analyst at Edward Jones & Co. who has a hold rating on GE shares, said in a telephone interview. “They hit the consensus numbers pretty much right on the head for sales and earnings per share, but missing the margin goal will be noticed.”
GE’s industrial profit margin widened last year to 15.7 percent, compared with 15.1 percent in 2012. It grew 66 basis points excluding the effect of acquisitions and 60 basis points with deals factored in, GE said.
“We would have been above 70 basis points” excluding those the supply-chain issues and energy management’s struggles, Chief Financial Officer Jeffrey Bornstein said. “We’re really counting small increments here.”
Fourth-quarter adjusted earnings from continuing operations rose 16 percent to $5.42 billion, or 53 cents a share, from $4.66 billion, or 44 cents, a year earlier, the Fairfield, Connecticut-based company said today in a statement. That matched the 53-cent average estimate (GE:US) of 13 analysts surveyed by Bloomberg.
Immelt said GE was “on track” to achieve the margin target during his annual presentation of year-ahead goals to shareholders and analysts on Dec. 18.
Sales climbed 3.1 percent to $40.4 billion in the quarter, topping the $40.1 billion average estimate in a Bloomberg survey of 10 analysts. Industrial sales climbed 5.6 percent to $28.8 billion.
Aviation revenues climbed 13 percent to $6.17 billion, while sales rose 17 percent to $5.31 billion at the oil and gas unit and were little changed at $7.69 billion at the power and water division.
GE Capital, the finance unit, reported sales of $11.1 billion, 4.5 percent lower than a year earlier, the company said in the statement. Profit climbed 38 percent to $2.49 billion.
Including pension costs and discontinued operations, GE’s net income rose 4.8 percent to $4.2 billion, or 41 cents a share, from $4.01 billion, or 38 cents, a year earlier. Operating profit climbed 5.4 percent in all of 2013 to $16.9 billion.
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