GE: Energy Business the Savior, But Even That’s Got Headwinds

By Keith Johnson
Wall Street Journal
April 17, 2009

General Electric’s first-quarter earnings were as dire as expected, with a 9% drop in sales and a 35% fall in profit. Once again, the single bright spot was the energy business—but even there, good news was mixed with bad.

The energy unit showed the best growth in the GE empire: Revenue rose 7% to $8.2 billion and profit jumped 19% to $1.3 billion. The energy business showed “great performance” in a quarter that will “be indicative of the total year,” chief financial officer Keith Sherin said in a conference call. GE shares fell 1.5% in early trading.

GE is pinning a lot of hopes on global stimulus spending on new infrastructure, especially in the energy business. Of a global total of about $2 trillion, GE said it sees the opportunity to snag at least $100 billion in deals, with a focus on the U.S., China, Western Europe, and the Middle East.

The question is when that stimulus money will really offset the fallout from the financial crunch. GE’s wind orders fell 8% in the first quarter, Mr. Sherin said. And while the company touted a recent wind farm deal with Invenergy as a sign that “U.S. wind projects [are] being executed,” the deal was announced last year and was just pushed back to 2009.

Still, the energy revolution is about more than wind farms—GE says it sees business opportunities of $500 million for each million-person city that adopts a smart power grid. Next week, chief executive Jeff Immelt said, GE will announce a deal for smart grid rollout in a “big city.”