General Electric has raised its first-quarter earnings per share forecast by a penny, citing strength across its businesses and proceeds from the sale of 80.5 million shares, at $26.50 (€20.48) per share, of Genworth Financial stock in a secondary offering.
Shares of GE, which is considered an indicator for the US economy due to its wide range of businesses, rose 1.4 per cent in morning trade and helped drive the stock market higher.
GE said the Genworth share sale generated income of about $75 million for the quarter, and the remainder of the increase came from improvement in business performance.
With more than 10 billion shares of stock outstanding, every penny earning per share can represent about $106 million of net income for GE.
"GE's end markets show solid growth, and our businesses are performing very well," said chief executive Jeff Immelt.
GE is benefiting from an improving global manufacturing demand, a rebounding commercial aviation market and earnings improvements at its media and health-care units.
GE, whose businesses include gas turbines, television and credit cards, said it expects first-quarter earnings will be 37-38 cents per share. Previously, it forecasted 36-37 cents per share.
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. 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.
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 per cent 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 per cent of its earnings to 40 per cent.
It plans to sell off the remainder of its Genworth holdings over the next two years.
GE rose 48 cents to $35.98 on the New York Stock Exchange, while Genworth shares fell 2 cents to $26.73. - (Reuters)
