NEW YORK – General Electric Co. (GE) Thursday raised its first-quarter earnings per share forecast slightly, citing strength across its businesses and proceeds from the sale of 80.5 million shares of Genworth Financial Inc. (search) stock in a secondary offering.
GE, said it expects first-quarter earnings of 37 cents to 38 cents per share. Previously it had forecast 36 cents to 37 cents per share.
Shares of GE, which is considered a bellwether for the U.S. economy due to its wide range of businesses, rose less than 1 percent.
Wall Street analysts, on average, have been looking for it to earn 37 cents per share, according to Reuters Estimates and the company earned 32 cents a share in the quarter last year.
GE said the Genworth share sale accounted for about $75 million in earnings improvement during the quarter, and the rest of the increase came from business performance improvements.
With more than 10 billion shares of stock outstanding, every penny of earnings per share for GE can represent about $106 million of net income, GE said.
"GE's end markets continue to show solid growth, and our businesses are performing very well," said chief executive Jeff Immelt.
GE, whose businesses include gas turbines, television shows and credit cards, continues to benefit from an improving global manufacturing demand, a rebounding commercial aviation market and earnings improvements at its media and health-care units.
The bullish tone from GE helped alleviate some of the concerns in the market surrounding GE's Wednesday announcement of slowing orders growth in February for short-cycle businesses, such as specialty materials, appliances and lighting.
"There is still a modest upward revision on (GE's) fundamentals, which should come as somewhat of a relief following the weaker than expected headline reading in short cycle orders," said JP Morgan analyst C. Stephen Tusa in a note to clients.
GE spokesman David Frail called the first-quarter performance "broad-based," adding that it may be premature to single out any businesses that spurred the earnings improvement before the quarter was officially finished.
Analysts noted GE's broad-based earnings improvement underscored improving global economic conditions.
"GE's upward guidance reinforces the strength we are seeing from the rest of the economy," said Steve Roukis, director of research at Matrix Asset Advisors, which holds GE shares.
GE did not change its full-year earnings forecast. It confirmed its outlook for earnings of $1.76 to $1.83 per share in 2005. Analysts expect $1.81 per share, according to Reuters Estimates.
It will receive net proceeds of about $2.6 billion from the Genworth offering and a related repurchase from GE of Genworth Class B common shares, GE said.
In the Genworth transaction, a total of 80.5 million shares of Genworth Class A common stock are being sold at $26.50 per share. The underwriters do not have an over-allotment option.
Genworth will also repurchase directly from GE about 19.4 million shares of Genworth's Class B common stock for $500 million. After these transactions, GE will hold about 52 percent of Genworth's common stock.
GE plans to use proceeds from the Genworth transactions to eliminate parent-supported debt at its GE Capital unit and enable GE Capital to increase the dividend it pays GE from 10 percent of its earnings to 40 percent, beginning in the second quarter.
GE has been trying to reduce its exposure to the insurance business in order to focus on more capital efficient parts of its finance businesses. GE said it plans to sell off the remainder of its Genworth holdings over the next two years.
GE rose 23 cents to $35.73 on the New York Stock Exchange (search), while Genworth shares rose 5 cents to $26.80.