General Electric, a bellwether for the U.S. economy, slashed its earnings guidance on Sept. 25 and warned of difficult times ahead due to the global credit crunch. The company, with interests spanning the world, said it had to cut its third-quarter and full-year earnings forecasts due to "unprecedented weakness and volatility in the financial services markets.
"Difficult conditions in the financial services markets are not likely to improve in the near future," it said, adding that it would also halt a share buy-back program.
Nearly half of the earnings of the company, which produces jet engines, locomotives, water treatment plants and medical equipment, come from its finance arm, GE Capital. The company is aiming to reduce that level, with the target of having the industrial businesses contribute 60% of profit by end 2009.
Ratings agencies Moody's and Standard and Poor's meanwhile confirmed their AAA top investment grade rating on GE, putting the outlook at 'Stable.' Both agencies noted the measures the company was taking, while SP said GE Capital was still better placed than its rivals.
For the three months to September, the company said it now expected earnings per share 43 to 48 cents, down from its July forecast of 50 cents to 54 cents. The full-year 2008 forecast was cut to a range of $1.95 to $2.10 from the previous estimate of $2.20 to $2.30.
Chief Executive Jeff Immelt said these were "tough decisions to further reduce risk and strengthen our balance sheet while maintaining our dividend."
In July, GE reported a 6% drop in its second-quarter profit to $5.1 billion while revenues rose 11% $46.9 billion.
Copyright Agence France-Presse, 2008