BOSTON (Reuters) - General Electric Co <GE.N> expects profit to rise at least 10 percent in 2008, led its infrastructure business, even with a slowing U.S. economy, Chairman and Chief Executive Jeff Immelt said on Tuesday.
By Scott Malone
BOSTON (Reuters) - General Electric Co <GE.N> expects profit to rise at least 10 percent in 2008, led its infrastructure business, even with a slowing U.S. economy, Chairman and Chief Executive Jeff Immelt said on Tuesday.
GE shares closed down 1 percent on a day when the major U.S. stock indexes fell more than 2 percent, with investors disappointed about a quarter-point interest rate cut by the U.S. Federal Reserve that was less than some expected.
"Ten percent is in the bag, we can do this," Immelt told investors in New York. "If the economy gets worse, if the credit cycles get worse, we still have big backlogs, big ability to price, big markets and I think we're still positioned to have a great year, even if the economy gets worse.
!ADVERTISEMENT!The conglomerate, which makes products ranging from jet engines to light bulbs, said its board had approved an 11 percent increase in its quarterly dividend to 31 cents a share, as well as a plan to buy back $15 billion worth of its shares over the next three years.
GE, which has a market capitalization of $378.07 billion, expected to report 2008 profit of at least $2.42 per share. Analysts, on average, had expected $2.49 per share, according to Reuters Estimates.
The Fairfield, Connecticut-based company estimated 2007 profits of $2.19 to $2.21 per share.
"We're giving you smart guidance," Immelt said. "We're talking about growing earnings at least 10 percent in 2008."
GE expected to generate 2008 revenue of about $195 billion, up 10 percent to 15 percent. Wall Street had looked for $186.56 billion, according to Reuters Estimates.
Immelt, whose comments were monitored on the Internet, said the company expects the fastest growth next year from its infrastructure unit, with operating profit up 15 percent to 20 percent. The company expects operating profit to rise about 10 percent at its health care, NBC Universal and industrial units, and up about 5 percent at its financial arms.
One analyst said the stock's muted reaction suggested investors were accepting the forecast as a number that could be beaten.
"This is a new route for them, just throwing out a minimum instead of a range and I think that makes sense," said Matt Collins, capital goods analyst at Edwards Jones in St. Louis.
"Infrastructure will be the real growth engine next year and really through the end of the decade. They've got it in the backlog ... they just have to execute."
U.S. HOUSING SECTOR A WORRY
He noted that the slowing U.S. housing market and a spooked U.S. consumer would be one of the conglomerate's biggest concerns in 2008.
"Our businesses that touch housing in the U.S. are going to be challenged in 2008," Immelt said.
GE's U.S. kitchen-appliance unit is one that tracks the housing market.
Finance makes up a sizable part of GE's operations, accounting for more than a third of its total profit through the first nine months of 2007.
"We're planning for a tough, but manageable, year" at GE's financial arms, Immelt said.
Immelt noted the company had caught up with rising raw material prices, which weighed down results in 2005 and 2006, but would be a "tail wind" in 2008.
'WHERE THE MONEY IS'
GE's foreign sales, particularly to the fast-growing economies of China and India, and the oil-rich Middle East, has been key to the company's remaining on a sold growth path even as the U.S. economy shows signs of slowing.
Immelt said the company's emerging-market revenue was growing at a rate of 20 percent to 25 percent per year.
"It's real, it's where the money is," he said
GE is one of four blue-chip industrials due to spell out their 2008 financial forecasts this week. Yet to come are 3M Co <MMM.N> on Wednesday, as well as Honeywell International Inc <HON.N> and United Technologies Corp <UTX.N> on Thursday.
Due to the size and diversity of their operations, these conglomerates are viewed as bellwethers of the economy.
GE shares edged down 38 cents to close at $37.03 on the New York Stock Exchange.
For the year, they are down 0.5 percent, trailing the 7.8 percent rise of the blue-chip Dow Jones Industrial average <.DJI>, of which GE is a component.
In the United States, GE trails only Exxon Mobil Corp <XOM.N> in market capitalization.
(Editing by Carol Bishopric and Andre Grenon)
