Europe short-circuits GE

The global giant posted a 16% earnings gain and met Wall Street's estimates. Yet investors see nothing but its trouble in the eurozone.

By Jonathan Berr Apr 19, 2013 12:19PM
A General Electric Co. logo Fabrice Dimier/Bloomberg via Getty ImagesGeneral Electric (GE) reported earnings early Friday that sounded pretty positive. Net income at the Fairfield, Conn.-based conglomerate rose 16% to $3.5 billion, or 34 cents per share, from $3.03 billion, or 29 cents per share, a year earlier as the company benefited from the sale of its remaining stake in NBCUniversal to Comcast (CMCSA). At $35 billion, revenue was little changed from a year ago.

Excluding one-time items, profit was 35 cents per share, matching the average estimate of analysts surveyed by Bloomberg.

Still, the company's shares are falling in morning trading. Why? CEO Jeffrey Immelt's cautious statements spooked investors.

In the company's earnings release, Immelt said business in Europe was even worse than GE had expected. Revenue in the Industrial Segment declined in the region by 17%. Orders from Europe in the Power & Water business fell 26% and revenue plunged 22%. Health Care segment revenue from Europe slumped 4%.

GE is hardly the only U.S. company whose profit was dragged down by Europe. Caterpillar (CAT) CEO Doug Oberhelman recently told CNBC that he was "very concerned" about its European operations. Ford (F) recently forecast a $2 billion loss from its business there, and rival General Motors (GM) lost about $1.8 billion in Europe.

Europe will continue to be a problem for a while. The Organization for Economic Co-operation and Development expects the eurozone economy to contract in 2013 for a second straight year. GE and other global giants can look forward to more spoiled earnings reports, thanks to the region's unresolved problems.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

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