GE profit drops on finance, NBC but tops forecasts

General Electric Co reported a better-than-expected quarterly profit as strength at its energy equipment business offset falling earnings at its hefty finance arm and the NBC Universal media affiliate.

The largest U.S. conglomerate posted on Friday a 36 percent drop in net income and warned of some signs that the economy may be continuing to deteriorate.

It forecast that GE Capital would be profitable for the year despite an expected rise in loan delinquencies, but it also recorded about $500 million in order cancellations at its infrastructure units, which make products ranging from electricity-producing turbines to railroad engines.

Shares were up 2 percent in afternoon trading.

The economy remains tough, said Chief Executive Jeff Immelt, on a conference call with analysts. There are places where we can still win and we are positioning the company to excel as we come out of this in 2010, 2011 or whenever that takes place.

GE is viewed as a barometer of the economy due to the size and breadth of its operations.

The numbers are showing stabilization in the global economy and in the performance of GE stock, said Jim Hardesty, president of Hardesty Capital Management in Baltimore, which owns GE shares. The result still wasn't good, though.

The Fairfield, Connecticut-based company plans to cut its costs by more than $5 billion this year.

GE executives stuck to their stance of not providing specific per-share profit forecasts, though investors said their comments reflected a conservative stance.

I got the impression that the optimism is gone, said Peter Klein, senior portfolio manager at Fifth Third Asset Management in Cleveland, Ohio, which owns GE shares.

PROFIT TUMBLES

GE's net income attributable to common shareholders fell 36 percent to $2.74 billion, or 26 cents per diluted share, down from $4.3 billion, or 43 cents per diluted share last year.

Analysts, on average, had looked for profit of 21 cents per share, according to Reuters Estimates. Tax benefits related to losses at GE Capital accounted for much of the beat, analysts said.

Revenue fell 9 percent to $38.41 billion. GE's order backlog remained stable at $171 billion.

Profit at GE Capital -- the company's primary weak spot -- fell 58 percent to $1.12 billion.

Earnings of 80 percent owned media affiliate NBC Universal fell 45 percent to $391 million on a 2 percent drop in revenue, though company officials noted the figure reflected higher than normal expenses for broadcasting the National Football League's Super Bowl and a comparison with a prior year period when television writers were on strike.

It said factoring out unusual items, profit at NBC Universal, which is 20 percent owned by France's Vivendi SA , would have been down 15 to 25 percent.

GE's Energy Infrastructure unit -- which makes products ranging from components for gas- and coal-burning power plants to solar panels -- notched a 19 percent rise in profit, to $1.27 billion.

Energy Infrastructure has been the backbone of growth for the company, said Daniel Holland, equity analyst at Morningstar in Chicago. Looking at the demand for gas turbines and the fact that we have a good incentive plan for renewable energy in place now, that should keep growth going pretty strong there.

GE has ceased giving numeric per-share profit forecasts, instead providing investors with a framework of how it expects each of its business units to perform this year.

That framework calls for profit to be flat to up 5 percent at its infrastructure arms and flat to down slightly at NBC. In December it forecast that GE Capital would earn about $5 billion this year, though last month it told investors that based on the Federal Reserve's expectations for the U.S. economy, the finance unit's profit could be half that.

We will remain profitable in the year, Immelt said.

During the first quarter, GE cut its quarterly dividend by 68 percent and was stripped of its top-tier AAA credit rating by both Moody's Investors Service and Standard & Poor's rating agencies.

GE has raised 93 percent of the money it plans to seek from long-term debt markets this year, and will start on its 2010 targets early once it has met its 2009 needs.

We're going to try to continue to fund in advance of our needs to just make sure that we keep a great liquidity balance, Chief Financial Officer Keith Sherin said in an interview.

SHARES RISE

GE's shares were up 24 cents to $12.51 on the New York Stock Exchange. Over the past 12 months, they are down approximately 63 percent over the past 12 months, a far sharper drop than the 36 percent fall of the Dow Jones industrial average <.DJI>.

GE shares are now trading at more than double their 52-week low of $5.86 hit on March 4.

It's not going to double again from here, said Edward Maraccini, portfolio manager at Optique Capital Management in Milwaukee, which owns GE shares. But as long as we see stabilization in results and for the capital position to stop deteriorating, it can definitely start to build off a base.

The cost to insure GE Capital's debt against default declined following the earnings report. It cost $625,000 in an upfront payment plus $500,000 a year in annual premiums to insure $10 million of debt, down from $725,000 at Thursday's close, according to Phoenix Partners Group data.

In heavy equipment, GE's competitors include a lineup of some of the world's largest companies, including Swiss engineering group ABB Ltd , French industrial group Alstom SA and German conglomerate Siemens AG .

(Reporting by Scott Malone; additional reporting by Nick Zieminski, Ryan Vlastelica, Dena Aubin and John Parry in New York and Atul Prakash in London; Editing by Derek Caney and Gerald E. McCormick)