General Electric posts sales slump, rattles recovery hopes

General Electric Co posted a sharper-than-expected drop in revenue on slack demand for wind turbines, railroad locomotives and other heavy equipment, casting doubts about the pace of the US recovery.
The largest US conglomerate's 5.1 percent decline in sales overshadowed better-than-expected profit and sent GE shares down 5 percent on Friday in their steepest slide since July as some investors took it as another sign that the economic recovery is faltering.
The better-than-expected profit reflected lower corporate expenses and a stronger performance at the company's GE Capital unit, which saw losses on loans decline and recorded more tax benefits than analysts had expected in the quarter. Revenue came to $35.89 billion, below the $37.54 billion analysts had expected, according to Thomson Reuters I/B/E/S. The shortfall also reflected faltering demand for gas turbines and jet engines.
GE shares were down 83 cents at $16.33 on the New York Stock Exchange, while the Standard & Poor's capital goods industry index was off 1 percent. GE's overall order backlog held steady at $172 billion. Chief Executive Jeff Immelt reported rising orders for both equipment and services - an indicator of future sales, the first time both have increased in two years. The company expects earnings per share to rise sequentially through 2012.
In July, GE said it would raise its quarterly dividend by 20 percent to 12 cents per share, starting a process of restoring a payout that it slashed from 31 cents per share during the downturn. Profit from continuing operations - which factors out GE's pruning of its finance arm, primarily the sale of its Japanese consumer lending business - came to $3.16 billion, or 29 cents a share, up 29 percent from $2.45 billion, or 22 cents a share, a year earlier. On that basis, GE beat Wall Street's earnings forecast by 2 cents per share.
Net income, including $1.1 billion in losses related to GE Capital portfolio restructuring, fell 18 percent. The results marked GE's second consecutive quarter of earnings growth after a nine-quarter streak of declines. So far this year, GE shares have risen about 13 percent, outpacing the 6 percent rise of the Dow Jones industrial average, of which it is a component.