World markets were alerted this week as GE published its third-quarter results - and so was the financial media.
The multinational giant caught the world's attention after showing unfavourable figures in comparison to last year's data. Profits shrank 44% to 2.419 billion dollars, against USD 4.312 bi for the same period in 2008; Revenues were reduced by 20% to 37.799 billion dollars. That was mainly explained due to losses in the company's financial branch, GE Capital Finance. There, income slumped 87%, even though it is still the segment which generates the highest revenues in the group. GE's other divisions Energy Infrastructure and Technology Infrastructure earned 1.6 billion and 1.7 billion, an increase of 11% and fall of 8%, respectively.
For many analysts, however, it did not come out as a total surprise. Forecasts were even more pessimistic concerning GE's performance, and that led to mostly soft articles in the media. Shares were down 0.8%.
This week I will be comparing the differences in reporting this story by a British newspaper (FT), a Brazilian newspaper (Valor) and a French news agency (AFP).
From my research, what I realised is that the articles, as a whole, tended to offset the negative aspects of the news by actually looking at GE Capital recovery plan, the good market perspectives and the better-than-forecasted argument. With so many negative figures exposed by the company this may sound a bit controversial, but to be honest for me it seemed like editors are already looking forward, to the bright end of the crisis - believed to be on the way -, and not that worried about dark past results.
In this sense, the Brazilian and French sources could be two examples. Valor did mention the "red numbers", however it emphasised the fact that GE's cost cutting and industrial profit did not give the company such bad results as predicted. Also, that GE Capital, which is the big responsible for the downturn, looks stabilised and with a good risk management it can still be going as a leading segment for the company.
AFP basically followed a similar approach to story. GE's numbers were pointed out and even though were reflecting the bad economic situation they were still better than expected. All in all, it was a rather positive article, only reminding that "cost cuts at many large firms may help profits in the short term but will not sustain profit growth", in the end.
The Financial Times, on the other hand, gave me a pessimistic impression of the story. Right from the headline and the first line it focused on how bad the results were and its negative consequences. Such alerting numbers by GE leave space for that, surely, but probably the fact that the correspondent decided to add the combination of BoA's, S&P 500 and Dow Jones loss results and also seemed not to be very convinced by CEO Jeff Immelt's arguments, left the focus more on investors still expecting "that GE will convert its record backlog into higher revenue".
Thus, my view for this story is that GE Capital profits were really impaired by the estate sector, as a direct result of the economic crisis that we are going through. However, as it is foreseen that recovery is on the way, GE will be amongst the ones that will benefit and improve together with the economy. For now, in my opinion, it is a good thing that the numbers were not as bad as analysts thought and that its CEO can talk about stabilisation in the troubled GE Capital. Therefore, it seems to me that GE engines are strong enough to resist this cloudy period, if they are kept with the right maintenance.
Financial Times:
Valor Online:
AFP
Well researched; well argued. 7/10
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