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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (5500)	8/30/2002 12:22:26 PM
From: stockman_scott	Respond to of 89467

RESEARCH ALERT-Worries surface over GE's 2003 profits NEW YORK, Aug 29 (Reuters) - Reduced pension fund income and weaker aircraft engine sales at General Electric Co. <GE.N> have some Wall Street analysts worried that the conglomerate won't be able to hit the consensus profit forecast for 2003. Lehman Brothers on Thursday said it cut its 2003 earnings estimate for GE, citing expectations for lower pension income, weaker aircraft engine and power systems results and the costs of expensing stock options. In a research note, analyst Robert Cornell lowered his estimate for GE's 2003 earnings per share to $1.76 from $1.81. Cornell said he expects GE's pension income, a perennial contributor to earnings, to be about $300 million lower next year, trimming earnings per share by 2 cents. GE's pension plan is fully funded, but the company has cut its projected rate of return to 8.5 percent this year from 9.5 percent in 2001. Pension plan assets also have dropped. Cornell said GE's recent decision to begin treating stock-option compensation as an operating expense would cost it a penny per share. The remaining 2 cents per share of his reduction comes from GE's aircraft engine and power systems segments, Cornell said, saying recent developments in those markets prompted the adjustments. "Recovery of the airline passenger traffic has somewhat abated in the past several months," which Cornell said does not bode well for GE's spare parts and maintenance business. The so-called aftermarket segment generally produces high profit margins. The cut brings Lehman's view a nickel below the average estimate among Wall Street analysts, which currently is $1.81, according to research firm Thomson First Call. The only other brokerage with an estimate as low as $1.76 is William Blair & Co., according to Multex, another research firm. Nevertheless, Cornell said GE's earnings could benefit from acquisitions that add to profits immediately. Morgan Stanley analyst Scott Davis said he expects GE to earn $1.79 a share in 2003, but acknowledged there is a downside risk to market expectations for GE earnings. But Davis said he is waiting to review September order data and other economic indicators before revisiting his GE estimate. "I'm looking for anything that gives us more clarity on a double dip recession," Davis said. "Hitting those numbers relies on the strength of the overall economy." GE shares fell 89 cents, or 2.84 percent, to $30.41 in morning trade on the New York Stock Exchange. After hitting 3 1/2-year lows in the market sell-off in late July, GE shares have risen about 26 percent. ((Tim McLaughlin, Boston newsroom 617-367-4106; fax 617-248-9563; e-mail boston.newsroom@reuters.com)) REUTERS * end of story *