Lastly, Moody's used the following cautionary language when it presented the case for a potential downgrade:
Moody's also notes that GE's industrial businesses retain strong competitive positions, and should demonstrate improved performance once the economy rebounds. Additionally, the company's $172 billion of infrastructure equipment and service backlog provides important visibility into future revenue. Recent initiatives to reduce costs and enhance cash flow generation should also help to support near term operating performance.Sphere: Related Content Print this post
"Nevertheless, the global economic downturn and continued tight credit market conditions create some strong headwinds for the company's long cycle Energy, Aviation, Transportation, and Healthcare businesses," said Moody's Lane. "Reduced order flow and deferral or cancellation of existing orders could be a more significant concern in the coming year."
Performance of the company's short cycle businesses (appliances, lighting, and local television stations) continue to exhibit weakness and could see greater earnings erosion during 2009. The impact of these short cycle businesses on GE industrial's overall performance, however, should be modest as they represent less than 5% of industrial operating profit.