GE Revenue Declines on Energy Weakness

General Electric's revenue and profit decline in its Energy Infrastructure unit was higher than expected.
Publish date:



) -- Shares of

General Electric

(GE) - Get Report

were down 4.5%, to $16.40, in morning trading Friday as investors reacted to a significant decline in revenue in the company's Energy Infrastructure unit.

During the company's

third-quarter earnings

conference call Chief Financial Officer Keith Sherin said the "wind market has really collapsed in the U.S." when discussing the unit's 14% year-over-year decline in revenue.

Another weak point for the energy division was that the oil & gas segment's third-quarter profit of $287 million was a 15% decline from the third quarter of 2009.

On the positive side, CEO Jeff Immelt expressed confidence that the company would have no problem in the higher capital requirements of the Basel III, saying "we feel pretty good that even by the end of this year we'll be in the ranges we need to be in."

GE's cash hoard grew to $78 billion during the third quarter. Immelt said the company would be looking to follow up on its $3 billion cash purchase of


with additional energy deals "in the $1 billion to $3 billion range." He also said that "if we don't see good opportunities, we'll increase the dividend and do more buybacks."

In a conversation with


, Charlie Smith, the chief investment officer at Fort Pitt Capital Group in Pittsburgh, Penn., described GE's quarter as "very uneventful," adding that "obviously the big wart was the decline in Energy Infrastructure," as the wind turbine business suffered amid the decline in natural gas prices. But he saw a silver lining, adding that "this will help GE's thermal business as people switch to gas. "

Smith also said that credit loss provisioning was still quite high at GE Capital and that the discussion of a possible "liability tail" from the sale of the company's U.S. mortgage business in 2007 was of some concern. General Electric stock is among the investments held by the funds he manages.

Ron Weiner, CEO of RDM Financial Group in Westport, Conn. noted that GE Capital's profits grew "for the first time in eight quarters," but described the unit "a finance albatross around

GE's neck." Weiner does not currently hold GE shares in the funds he manages, adding that he would focus "on other industrials more directed to the emerging markets," including


(CAT) - Get Report

, and international resource plays like

Peabody Energy

(BTU) - Get Report

, both of which his firm holds .

Weiner also said that "Immelt is focusing on the right things."


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Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.