NEW YORK (MarketWatch) -- General Electric Co. shook the U.S. stock market Friday, reporting a 6% drop in first-quarter net profit -- largely over trouble in its financial-services businesses -- and cutting its 2008 earnings outlook.
It was GE's first major downward earnings revision in memory, Oppenheimer analyst Christopher Glynn said in a note, and reflected mounting difficulties posed by a weakened U.S. economy.
For the first quarter, General Electric GE, +2.52% said net income dropped to $4.3 billion, or 43 cents a share, from profit generated during the first quarter of 2007, while revenue rose 8% to $42.24 billion.
From continuing operations, the Dow Jones Industrial Average component earned 44 cents a share, well short of the FactSet Research-compiled mean analyst estimate of 51 cents a share.
GE shares fell nearly 13% to close at $32.05 in heavy trading. The drop weighed heavily on the Dow Jones Industrial Average (DJII), dragging it 256 points lower to 12,325.
On a conference call with investors, Chief Executive Jeff Immelt put the blame for the miss squarely on Bear Stearns Cos. BSC, +2.95% which nearly went bankrupt last month before the Federal government and J.P. Morgan Chase Co. JPM, -0.73% stepped in to bail out the investment firm.
"We had planned for an environment that was going to be challenging...[but] after the Bear Stearns event, we experienced an extraordinary disruption in our ability to complete asset sales and incurred marks of impairments and this was something that we clearly didn't see until the end of the quarter," Immelt said.
GE said the inability to complete asset sales and higher mark-to-market losses accounted for a hit of fully 5 cents a share.
The company also saw a slowdown in its U.S. health-care and consumer and industrial markets, Immelt said, on the call.
"We did see a slowing U.S. economy in Q1," he said.
On the brighter side, infrastructure orders were 12% and added more than $3 billion to GE's backlog, the company said. Earnings for the business rose 17% to $2.59 billion, representing 41% of GE's total profit.
"Demand for our global infrastructure business remained strong, but our financial-services businesses were challenged by a slowing U.S. economy and difficult capital markets," said Immelt.
Overall, GE generated 8% more orders in the quarter, to $24 billion, and its equipment backlog climbed 41% to $52 billion, the Fairfield, Conn.-based company said.
At GE Money, quarterly earnings dropped 19% from the prior year to $995 million and its commercial finance profit dropped 20% to $1.16 billion.
GE operates one of the largest financial services businesses in the country.
Health-care and industrial earnings also registered double-digit profit falls, while infrastructure profit climbed 17% and NBC Universal's profit rose 3%.
GE also lowered its 2008 profit target to a range of $2.20 to $2.30 a share, with second-quarter earnings pegged at 53 cents to 55 cents a share. Analysts had expected annual earnings of $2.43 and second-quarter earnings of 58 cents a share, according to FactSet.
The revised outlook means that earnings from continuing operations will grow 5% at best this year and at worst, won't grow at all, GE said.
"We are not counting on the business getting any better, vis-à-vis...the U.S. consumer," Immelt said. "We have actually allowed for a worsening of the U.S. consumer in our GE Money business. So I think that is the way to think about the U.S. and the U.S. economy."
GE is the second Dow component to report full quarterly financial results so far this earnings season.
Alcoa Inc. AA, -3.82% was the first, posting a lower profit amid poor demand from top industrial customers, surging energy costs and a weak U.S. dollar. See full story.