GE drops a bomb

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You can’t go into the heart of first-quarter earnings-reporting season much worse than this: with the huge profit shortfall reported by General Electric Co. today.

Analysts were expecting the company to report earnings from continuing operations of 51 cents a share. GE came in at 44 cents, down 8% from a year earlier.

‘We hate to disappoint investors,’ GE Chairman Jeffrey Immelt said in announcing the results.

‘Disappoint’ is quite the understatement: I’ve lost track of the number of analysts and money managers who have used the word ‘shocking’ today to describe the results.

And if you buy the idea that GE, with its multitude of businesses, is a microcosm of the broader economy, it’s chilling to think about what was happening to sales and profit margins at many other companies large and small in the first quarter -- and particularly in March, amid the credit market’s near-meltdown.

How bad was it? GE’s huge financial-services business was a big source of trouble, as the company’s normal wheeling-and-dealing as a financier and investor (particularly in commercial real estate) was hampered by credit-crunch-related woes. Profit at GE Commercial Finance tumbled 19.6% from a year earlier.

But if that was the only problem, the stock might not have crumbled the way it did, down 13% in the session, to about $32.

‘It is shocking to us how weak results were across the portfolio’ of businesses, wrote Nicole Parent, an analyst at Credit Suisse, in a research note.

Profit at GE’s industrial division was down 16.2% in the quarter, owing to a ‘difficult’ market for appliance sales, the company said. (Hello, housing meltdown.)

The healthcare unit’s profit sank 17.1%, which analyst Kathleen Shanley at research firm Gimme Credit said stemmed in part from an 18% drop in equipment orders from community hospitals in March, reflecting funding troubles tied to the municipal bond market.

Even the company’s vaunted infrastructure business -- aircraft engines, power-plant turbines, locomotives, etc. -- missed expectations. Its profit was up 17%, but Parent had expected 22% growth. Profit margins were weaker than anticipated, she said.

The only possible silver lining here is that, by delivering such a lousy report, Immelt has lowered the bar for first-quarter earnings at many other companies. If investors weren’t braced for ‘disappointment’ in the reports that will begin pouring out next week, they ought to be now.