GE beats on profit but cuts revenue target on oil, gas weakness

By Alwyn Scott

NEW YORK (Reuters) - General Electric Co beat analyst profit forecasts in the third quarter, but revenue growth remained sluggish, prompting the company to scale back expectations for full-year revenue and profit on Friday, sending shares sharply lower.

The industrial giant's adjusted profit jumped 10 percent to 32 cents a share, exceeding the 30 cents that analysts had estimated on average, according to Thomson Reuters I/B/E/S.

GE raised its full-year target for cash returned to shareholders to $30 billion from $26 billion and noted it had returned $25 billion in the first three quarters.

But slow economic growth, particularly in the oil and gas business, weighed on revenue. Organic revenue, which excludes growth from acquisitions, grew 1 percent in the quarter.

The company's shares were the biggest decliner on the Dow Jones Industrial Average index, falling 2 percent to $28.48 in early trading on the New York Stock Exchange.

Analysts had been looking for GE to report stronger revenue growth after a weak first half, but that was stymied by a 25-percent slump in oil and gas revenue in the quarter.

Investors were skeptical that GE's organic revenue growth could hit 5 percent in the fourth quarter, Sanford C Bernstein analyst Steven Winoker wrote in a note.

Anemic third-quarter growth "again calls into question the company's ability to hit the 5 percent" target, he said.

Company officials were more sanguine. Cost cutting in oil and gas and other businesses and a diminishing drag from foreign exchange translation should allow GE to deliver $2 a share in adjusted earnings in 2018, Chief Executive Officer Jeff Immelt said on a conference call.

FORECASTS ADJUSTED

While analysts expect second-half growth of about 15 percent in the power business, GE's largest division, power revenue grew just 7 percent in the third quarter.

GE trimmed its full-year revenue forecast to flat to 2 percent growth, down from 2 percent to 4 percent growth.

It narrowed its adjusted profit forecast to between $1.48 and $1.52 a share, compared with the $1.45 to $1.55 a share forecast at the end of the second quarter.

The company lifted its cash flow outlook, which it said allowed the boost in share buyback plans by an additional $4 billion. It now expects free cash flow and dispositions to total at least $32 billion, up from a range of $29 billion to $32 billion it forecast at the end of the second quarter.

GE's net income from continuing operations rose to $2.10 billion in the third quarter ended Sept. 30 from $1.97 billion a year earlier. Earnings per share from continuing operations rose to 23 cents from 19 cents.

Total revenue rose 4.4 percent to $29.27 billion.

(Additional reporting by Rachit Vats in Bengaluru; Editing by Bernadette Baum)