Transcripts

GE Shares Take A Shocking Tumble

JEFF YASTINE: Shares of General Electric tumbled nearly 11 percent today to their lowest level since 1996. The giant conglomerate reported a 44 percent drop in fourth quarter earnings. Excluding charges, GE earned $0.36 a share, a penny less than analysts had expected and well below the $0.68 it earned a year ago. Revenues also fell short, $46 billion, $4 billion less than Wall Street estimates. With such a diversity of businesses, GE is considered a bellwether of American business. Scott Gurvey takes a look at what GE's results tell us about the U.S. economy.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: General Electric has its corporate hands in almost every sector of the economy, which is why we pay special attention to its quarterly reports. As a comparison of 2007 to 2008 profits shows, GE's capital finance arm became a much smaller part of the company's business over the year. But Richard Tortoriello of Standard & Poor's notes that GE's energy business grew.

RICHARD TORTORIELLO, GE ANALYST, STANDARD & POOR'S: Shipments of gas turbines to generate electricity have been very strong. We see continuing demand, but primarily purchased by governments so there is less of an economic effect there and also oil and gas remained strong, oil and gas drilling in the services area.

GURVEY: The take-aways here are that companies which supply energy- producing technologies may make good investments in the year ahead also companies which service technologies by making parts or actually making infrastructure repairs. This is both because owners will try to stretch the life of their existing equipment and because of an expected increase in government-funded infrastructure repair projects. It is important to note that even though GE's profits for the quarter and the year were down sharply, the company still made money and says it will continue paying its dividend. In addition, GE expects its financial business to stabilize in 2009. And economist Steven Wieting of Citi says that confirms some signs the credit crunch is beginning to ease.

STEVEN WIETING, SR. ECONOMIST, CITIGROUP: Away from the stock market, from the equities markets, there has been meaningful improvement in credit. And I say that even looking at the setbacks that we've seen a bit in 2009. Inter bank rates have moved down very sharply in a sign that official supports to solvency for the banking system have convinced counterparties and even longer term corporate borrowing costs for, particularly for high grade borrowers, they've come down quite considerably.

GURVEY: Unfortunately, the GE report does little to remove the uncertainty which has many would-be market participants sitting on the sidelines. GE says it will not forecast its 2009 performance, only saying it will be a difficult year. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.