Part of the long-term thinking at GE (GE) has been that, as the US economy slowed, emerging markets in Asia would drive double-digit returns. GE’s international business would more than make up for any trouble in its home market.
The idea was good until it wasn’t. As the global economy gets hit with slower growth, the one big earnings lever that GE hoped would work has fallen on relatively hard times. Business in China and India are starting to fray. According to the FT. "Nani Beccalli, head of GE International, forecast economic growth would slow in the two Asian countries."
GE’s stock price is already near a multi-year low. The company showed trouble in its financial unit last quarter. Its industrial unit also did poorly. The conglomerate is trying to sell its appliance operation, but it is only 4% of GE’s revenue.
GE earnings have been driven by its huge infrastructure business. Much of that operation relies on building large projects in emerging markets. And, GE is saying those markets are not going to produce as forecast.
GE is admitting that its problems just got worse.
Douglas A. McIntyre
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