General Electric Co. (GE) reported first-quarter earnings of $0.26 vs. $0.43 a year ago, but better than the $0.21 consensus expectations. The only real area of strength for the firm was in its Energy Infrastructure business, where segment profits increased by 19%. The most significant areas of weakness were at NBC Universal, which was hit hard by weak advertising revenues (something shared by almost all media companies) and the GE capital unit.Investors are probably most concerned about the Capital unit. The good news is that the unit was still profitable, and it has shrunk its asset base. The bad news is that the profits are down 58% and the credit trends look awful.
Looking forward, GE conducted its own stress test under the assumptions that are being used for the big banks. We will properly ignore the best-case scenario (it is absurdly optimistic and does not have any stress in it). Under the adverse scenario, it sees revenues of $9.2 billion before taxes and credit provisions. However, the credit provisions would be $13.7 billion resulting in a $4.5 billion pretax loss.
GE’s full presentation can be viewed here.
I do not own GE shares.