Siemens Putting Screws to Immelt

This is whom people compare GE (GE) to. If they are doing fine, ummm, Jeff, what the problem?

Siemens (From the FT):

Siemens (SI) beat analysts’ estimates and appeared to have outshone its rivals when it announced on Tuesday a sharp rise in quarterly operating profit and reaffirmed its forecast for 2009.

For the first quarter of fiscal 2009, which ended in December, Europe’s largest engineering group saw an 8 per cent decline in orders compared to the same period in the previous year. However, Peter Löscher, Siemens’ chief executive, said that in the absence of major order cancellations or price erosion, the group would adhere to its full-year forecast.

“We got off to an excellent start this fiscal year,” he said.

The market was cheered by Siemens’ announcement, which came on the heels of a string of bad news from main competitors such as General Electric and Philips, which both reported disappointing quarterly figures in recent days. The news also coincided with an unexpected rise in German business confidence.

Siemens shares were up as much as 5.2 per cent on Tuesday against a fairly flat European market. The German conglomerate said total sectors profit – which excluded one-off events – climbed 20 per cent year-on-year to more than €2bn.

Order income fell by 8 per cent to €22.2bn, mainly hit by a double-digit drop in the more cyclical industry sector. Siemens, which makes everything from nuclear power plants and train carriages to hearing aids and light bulbs, said it was still aiming to post a total sector profit of €8.0bn-8.5bn this year.

Markets were stunned in November when Mr Löscher reaffirmed this profit goal amid a sharp downturn of the global economy. Most analysts forecast an operating profit well below Siemens’ own target.

Contrast this to the train wreck that was GE’s most recent quarter.

Fourth-quarter 2008 earnings from continuing operations of $3.9 billion, or $.37 per share before preferred dividend, or $.36 per share attributable to common shareowners. Results included $1.5 billion of after-tax restructuring and other charges, including increased reserves in current environment, which are above the Company’s original plan and the restructuring will lower costs for 2009 and beyond.

For the year, revenue was $183 billion, up 6%, and earnings were $18.1 billion, down 19%. This was the third highest earnings year in GE history.

“In a very tough environment, we delivered fourth quarter business results in line with expectations we provided in December,” Chairman and CEO Jeff Immelt said. “We grew Infrastructure and Media by 3% in the quarter and 10% for the year. Energy Infrastructure led the way in the quarter with 11% segment profit growth driven by continued global demand. Technology Infrastructure grew earnings by 1%, led by 21% growth in Aviation. NBC Universal segment profits declined 6% in fourth quarter as strong cable earnings were offset by declines in the local stations.

“Capital Finance earned $1 billion in the quarter and $8.6 billion for the year,” Immelt said. “We had several negative impacts to earnings in the quarter including increased loss reserves, negative marks and impairments. These charges, along with global benefits, generated a tax credit that more than offset our pre-tax loss. We also originated $48 billion of new assets in the quarter at solid margins.

Immelt recently has hia AAA rating backed and the market sold off GE shares. Translation? “We still do not believe ratings agencies”. He says the dividend is safe “for 2009”. Ok, we’ll see.

Siemens is immelts real problem. If they can do it, why can’t he?

Disclosure (“none” means no position):Long GE, none

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