GE growth meets forecasts, but margins a worry (Reuters)

(Reuters) – General Electric Co reported earnings that met Wall Street expectations, but its shares slipped 1.4 percent as investors worried about declining profit margins at its energy equipment division.

The decline -- to a rate of 13.7 percent from 16.5 percent a year earlier -- reflected weak demand for electric turbines holding down selling prices at the largest U.S. conglomerate's biggest industrial unit.

"Margins missed our forecast and were down year on year in the four big industrial businesses," said Jeffrey Sprague, managing partner at Vertical Research Partners. "There is little or no operating leverage in GE's portfolio due to low-priced equipment in backlog and R&D headwinds."

A lower-than-expected tax rate offset the weak margins, allowing the company to notch 18 percent profit growth.

GE, which also makes jet engines and railroad locomotives, said on Friday the third quarter marked a turning point for margins, which it said would improve in the fourth quarter.

"In 2012, we should have solid organic growth and expanding margins," Chief Executive Jeff Immelt told investors on a conference call. "We're lined up to have solid growth in aviation and energy."

The Fairfield, Connecticut-based company expects to increase profit by a double-digit percentage rate next year, despite worries that Europe's brewing debt crisis could hit global demand. GE noted that it generates just 18 percent of its industrial revenue on the continent.

That made it the second big U.S. manufacturer to weigh in on 2012 this week. United Technologies Corp on Wednesday said it looked for 2012 profit to grow about 10 percent, excluding the effects of the $16.5 billion acquisition of Goodrich Corp.

GE shares were down 2.3 percent at $16.24 on Friday afternoon on the New York Stock Exchange. The decline came on a day when the Standard & Poor's 500 index was up 1.2 percent.

EMERGING MARKETS STRONG

Sales outside the United States were up 25 percent in the quarter, with strength in Brazil, Russia and China helping to offset slack demand in GE's home country and Europe.

Overall orders for industrial equipment -- an important indicator of future sales -- rose 16 percent. International highlights included China, where orders were up 65 percent; India, up 25 percent; Latin America, up 15 percent and Russia, which more than doubled, but off a relatively smaller base, Chief Financial Officer Keith Sherin said in an interview.

Big third-quarter orders included an $800 million deal to supply gas and wind turbines to Brazil and $300 million worth of turbines to Egypt. GE also reached two new Russian joint ventures to make energy and healthcare equipment.

GE spent $11 billion through late 2010 and early 2011 to build up its presence in the energy sector as it sold its majority stake in the NBC Universal media business.

"The organic growth rate in industrial was strong," said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire. "Those are telling and they give us a little bit of a look into next quarter and beyond."

The report comes amid a wave of generally strong earnings reports from big U.S. manufacturers. Also on Friday, Honeywell International Inc reported a 45 percent profit rise that topped expectations. Fellow blue chips Caterpillar Inc and 3M Co will report next week.

Still, investors remain concerned whether Europe's crisis could drag down global demand by shaking the financial system.

"Possible concerns going forward are going to be related to Europe and what impact that may have, not just there but on global growth in general," said Perry Adams, vice president and senior portfolio manager at Huntington Private Financial Group in Traverse City, Michigan. "There's elevated uncertainty."

GE has been preparing for an uncertain economy.

"I don't think the environment has really surprised us," Immelt said. "We've positioned our company to win in '12."

BUYS BACK BUFFETT STAKE

GE reported third-quarter earnings attributable to common shareholders of $2.34 billion, or 22 cents per share, compared with $1.98 billion, or 18 cents per share, a year earlier.

Revenue was little changed at $35.37 billion, above the $34.94 analysts had forecast.

Factoring out one-time items, profit came to 31 cents per share, meeting analysts' average forecast, according to Thomson Reuters I/B/E/S.

The results included an 8-cent-per-share charge to buy back the preferred shares the company had sold to Warren Buffett's Berkshire Hathaway Inc during the financial crisis.

Buying back the Buffett stake, which carried a preferred dividend, will boost GE's annual earnings by 3 cents per share in the coming years.

Closing that deal also allows GE to focus its capital on buying back shares -- Immelt wants to reduce the shares outstanding to their level prior to October 2008, when the company sold $12 billion of common shares in addition to Buffett's stake -- raising its dividend and doing small acquisitions.

The company bought back $1 billion in shares through the third quarter, Sherin said.

"We had a market that we thought was good prices to buy the stock back at and we ramped it up a bit," Sherin said. "We're going to balance it with what we do with the dividend as a priority and what we do with M&A."

(Reporting by Scott Malone in Boston, additional reporting by Nick Zieminski, Edward Krudy and Ryan Vlastelica in New York, editing by Derek Caney, Dave Zimmerman and Matthew Lewis)

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Service sector picks up, jobs still a worry (Reuters)

By Steven C. Johnson Steven C. Johnson – 54?mins?ago

NEW YORK (Reuters) – The dominant services sector picked up steam unexpectedly last month, snapping a three-month streak of slower growth, though the pace of hiring eased slightly, underscoring broader job market concerns.

The surprise jump in the Institute for Supply Management's non-manufacturing index was cause for some encouragement, analysts said, as it suggested consumers were holding up better than thought in what appears to be a stalling U.S. economy.

Yet it probably will not be enough to relieve pressure on President Barack Obama to spur more job creation. Obama is due to detail a new jobs plan in a national speech on Thursday.

Last week, government data showed the economy added no new jobs in August, leaving the jobless rate at or above 9 percent for a fifth consecutive month.

"The unexpected rebound (in the ISM report) will help to ease recession fears following last week's news that payroll employment stagnated," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

But he said the ISM reading of 53.3 in August, while up from July's 17-month low of 52.7, "is consistent with only muted economic growth of about 1.5 percent."

Economists polled by Reuters had expected a 51.0 reading. A reading above 50 indicates expansion.

While new orders rose, suggesting continued demand, the employment index slipped to 51.6, its lowest since September 2010, underscoring the difficulties facing the roughly 14 million Americans who are out of work.

Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, said the ISM employment reading indicates payroll growth "of only about 50,000," well below what would be needed to make a dent in the jobless rate.

He also warned that the report is "little more than a lagging indicator of the rate of growth of core retail sales, which have held up well in recent months."

"There are signs that the economy continues to be under stress," Lockheed Martin Corp Chief Executive Robert Stevens said on Tuesday.

Speaking at the Reuters Aerospace and Defense Summit in Washington, Stevens cited high U.S. unemployment and weak economic growth. But he added, "It's not clear to me whether that conveys a sense of a double-dip recession."

ALL ABOUT JOBS

The poor U.S. jobs outlook, along with a prolonged debt crisis in Europe, helped spark a stock market sell-off last month that has battered business and consumer confidence.

That has increased pressure on the Obama administration, particularly with the 2012 election just over a year off.

"Jobs growth is far below the level needed to bring the unemployment rate lower on a sustained basis," said Michael Woolfolk, currency strategist at BNY Mellon in New York.

Political clashes over the U.S. budget and debt burden, which led Standard & Poor's to strip the country of its AAA credit rating, also unnerved investors and consumers alike.

Stocks pared some losses Tuesday after the better-than-expected report but were still down more than 1.5 percent, while buying of safe-haven U.S. government debt faded slightly.

EUROPE, ASIA STRUGGLE, FED IN FOCUS

Firmer growth in the U.S. service sector was at odds with readings from beyond U.S. borders. Data on Monday showed service sector growth slowed sharply in the euro zone, Britain and China, boosting fears of global recession.

If the United States, the world's largest economy, can keep out of recession, that outlook may improve, analysts said.

Wall Street increasingly expects the Federal Reserve, which already warned it may hold interest rates near zero until 2013, to pour more money into the financial system to boost growth.

"At the margin, (Tuesday's ISM data is) an argument against any further accommodation at this point, but this doesn't necessarily countervail the whole bulk of the other data," said Bill Jordan, economist at Ried Thunberg, a unit of ICAP.

Fed Chairman Ben Bernanke is scheduled to speak in Minnesota on Thursday about the U.S. economic outlook. The Fed's entire policy-setting committee will meet September 20-21.

(Additional reporting by Mike Miller in Washington and Emily Flitter in New York; Editing by James Dalgleish)

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Wall Street drops on French bank worry day after rally (Reuters)

NEW YORK (Reuters) – Stocks fell sharply on Wednesday, wiping out most of the previous session's gains, on fears of tumult in the French banking sector, which has significant exposure to shaky European debt.

U.S. financial stocks led the decline on worries that any French bank problems could spread to them. The KBW bank index slid 6 percent. Large financial institutions' shares sank, including Bank of America Corp, down 7.2 percent at $7.05.

French banks' shares tumbled in Paris trading even after a Societe Generale spokeswoman denied rumors of trouble. Societe General, where U.S. traders have focused their attention, fell 14.7 percent and BNP Paribas dropped 9.5 percent.

"You've already had situations in Greece, Spain has been in there, Portugal, and now if you are talking about France, which because it's a bigger economy, it probably generates more concern on a comparison basis," said Gordon Charlop, managing director of Rosenblatt Securities in New York.

"So there are investors who are a little bit more cautious about European financials and that translates into financials here."

Stocks rallied on Tuesday after the Federal Reserve promised to keep interest rates near zero for at least two more years. The S&P 500 index had its best performance in more than two years.

"Investors are kind of pondering Bernanke's message and are probably looking for something more than they got. They might be selling into the meeting that he is having at Jackson Hole -- that could be part of it, too," Charlop said.

The Fed chairman is due to give his yearly speech at the Jackson Hole, Wyoming, meeting at the end of August.

The Dow Jones industrial average dropped 363.17 points, or 3.23 percent, to 10,876.60. The Standard & Poor's 500 Index lost 36.12 points, or 3.08 percent, to 1,136.41. The Nasdaq Composite Index fell 70.01 points, or 2.82 percent, to 2,412.51.

The CBOE Volatility Index shot up 19.1 percent. Earlier, the VIX had climbed slightly more than 20 percent, representing the third session in the last five that the index has jumped at least 20 percent.

Walt Disney Co was among the Dow's worst performers, tumbling 9.6 percent to $31.38 a day after the company's quarterly results failed to reassure investors that the entertainment company could do well in a weak U.S. economy.

Even after Tuesday's snap-back rally, the S&P 500 is down nearly 17 percent since its 2011 closing high set on April 29. Worries about the U.S. economy and high levels of public debt in Europe have sent stocks cascading down sharply over the last two weeks.

(Reporting by Chuck Mikolajczak; Additional reporting by Ashley Lau; Editing by Jan Paschal)

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Some worry about nuclear plant evacuation plans (AP)

Retiree Bret Gross of San Clemente loves Southern California weather and the seashore. Yet he's ready for a quick getaway, leaving his car's tank at least half full of gasoline.

Is he worried about earthquakes? Yes. Wildfires? Sure. Floods? Yep.

And then there are those two San Onofre nuclear power reactors five miles down the road. Gross worries that the area cannot be quickly evacuated in a severe nuclear accident.

"Forget the amount of training and plans," he said. "It'll be ugly."

Residents near 12 of 65 U.S. commercial nuclear power sites were interviewed following an Associated Press investigative series that reported population increases of up to 4 1/2 times since 1980 within 10 miles of plant locations.

Those interviewed voiced a mixture of anxiety, confidence and resignation about the safety of reactors. Many doubted they can safely and quickly evacuate in a major accident. Despite the existence of formal evacuation plans, many said they didn't even know where to go. They predicted confusion and panic on crowded roadways.

Some vowed to ignore instructions to take initial shelter at home — a strategy increasingly favored by disaster planners in the face of population expansions. Some residents said they have devised their own emergency plans, intending to ignore official directives.

By law, evacuations must be prepared for areas within about 10 miles of every nuclear plant, but many plans haven't kept up with changing populations, according to the AP investigation.

Also, federal regulators don't set standards for how quickly people must be capable of evacuating. Meanwhile, aging reactors have been operating at higher power, risking larger radioactive releases.

Planning for evacuations falls to local communities and states, all under supervision of the U.S. Nuclear Regulatory Commission and the Federal Emergency Management Agency. Even the best planning, however, is challenged by the extraordinary growth around many plants. Population more than doubled in evacuation zones of a dozen nuclear sites over three decades, according to AP's analysis. The population within 10 miles of San Onofre ballooned by 283 percent to 98,631 since 1980.

Despite population growth, many residents insisted they are relatively comfortable living near nuclear plants. Many work at a plant or live with someone who does.

Yet even some strong nuclear advocates assumed evacuations would bog down.

South of Miami, the population around the Turkey Point plant quadrupled to 155,118 over the past 30 years. Two miles away in Homestead, retired industrial engineer Clara Waterman Powell said nuclear power is "the way of the future." She said she trusts plant workers, yet she can't imagine an orderly evacuation. "If everybody got in the car and started driving, where would we go?" she asked.

In Fort Calhoun, Neb., about five miles from the nuclear plant with the same name, 86-year-old Feris Stevenson said he doesn't worry much about its safety. To him, it's "just another power plant."

Regarding a possible accident, he added, "Why worry about something you can't do anything about?" He thinks it would be hard to evacuate, especially with the Missouri River flooding areas around the plant. "We've got one major road getting out of here," he said, referring to U.S. Highway 75.

Larry Jones and his wife, Jean, have lived in Blair about three miles from the Fort Calhoun plant for 30 years. "It's always in the back of your mind," she said.

The couple said they are unsettled by the memory of hearing long ago that the plant, which opened in 1973, was not designed to last until now. The AP investigation found that federal regulators have been relaxing safety standards to keep aging reactors within the rules and therefore extend their lives.

Serious weaknesses also were found in evacuation plans, including the failure to test different scenarios involving the weather or the time of day. And evacuation zones have remained frozen at 10 miles since they were established in 1978, before the accidents at Three Mile Island, Chernobyl and Fukushima Dai-ichi in Japan.

Some watchdogs say evacuation standards also are kept lax to keep plants running, as nearby populations swell.

At the two-unit Calvert Cliffs site, population within 10 miles has ballooned by 224 percent since 1980, to 48,843.

Darlene Cocco-Adams, an attorney who lives in Lusby, Md., nine miles from the site, predicted havoc in a nuclear emergency. She said there's just one main road leading out of town, and it sometimes backs up "like New York traffic."

"You couldn't get out of here fast enough," she said.

Many residents living near plants said they regularly receive emergency instructions, usually from the plant operator. Some post them on refrigerators or carefully file them. Others simply toss the document, or stuff it into a drawer and forget about it.

"I just throw it away because we're goners anyway" in a severe accident, said Debra Dominski, 52, who has lived in London, Ark., two miles from the twin reactors of Arkansas One in Russellville, for the past 20 years.

Steven Kerekes, a spokesman for the industry's Nuclear Energy Institute, said "evacuations can work well," with traffic rerouted in a single direction during an emergency.

He said a June survey conducted for NEI found that 81 percent of 1,152 adults living within 10 miles of a nuclear facility said they know what to do in an emergency, with 45 percent "very well informed."

Glenn Cannon, director of emergency management for Pennsylvania, said evacuation is possible. "How quick it is depends on the population you're trying to move and what those road resources are," he said. The state is home to nine operating reactors on five sites, including one unit at the Three Mile Island facility, where the nation's worst nuclear accident occurred in 1979.

Gwen Keenan, bureau chief for preparedness at Florida's emergency agency, acknowledged that evacuations could be complicated by people who flee even though they are told to stay put.

"The roads have the capacity. We have the capacity to get out the word," she said of Florida. "I think the biggest wild card is the behavioral aspect: Will people listen?"

The U.S. nuclear industry's most explosive growth has occurred on the Florida's east coast, around the two-reactor Saint Lucie complex near Fort Pierce, where the 10-mile population of 43,332 in 1980 grew 366 percent to 202,010 in 2010.

Retired clock maker Phil Hollis, of Jensen Beach, Fla., lives six miles from St. Lucie and says he feels little worry.

He thinks he received — but didn't read — emergency instructions mailed by the plant operator.

He's uncertain what route to take in an emergency. "I'd just head west" away from the ocean, he guessed.

Many residents were at a loss to explain why they pay so little attention to planning for a nuclear emergency, including some who should perhaps know better.

Barb Tummel, 48, of Monticello, Minn., drives a school bus and lives within two miles of the Monticello plant, where the 10-mile population rose 314 percent to 58,538 over the past three decades.

Her parents both retired from the plant, and she trusts in its safety. As a driver, she said she knows the city plan for evacuating children from schools in a nuclear accident.

But she wasn't sure how she'd handle an accident when school isn't in session. "I think in the calendar they give out every year, I'm sure there's a page on evacuations. I don't necessarily read all those pages."

And she admitted she has no family plan: "I don't. I should, though."

At Crystal River on Florida's west coast, the population has more than doubled since 1980. Nancy Little Lewis, 53, a real estate broker and advocate of nuclear power, has lived 12 miles away for 17 years and believes it is quite safe.

However, she says there should be some standard for how long evacuation can take and can't imagine following official instructions to stay at home in a major nuclear accident. "I wouldn't do that. We're not talking about a hurricane. We're talking about something much worse," she said.

Others asked, what would be the point of a standard for evacuation times?

"It wouldn't work anyway," said Judith Freed, a psychotherapist in Guilford, Vt., who has lived seven miles from the Vermont Yankee plant for 40 years. She said country roads in that area could not handle an evacuation.

Many residents said they had come up with their own evacuation strategies. Lynn Baldwin, 42, of Soddy-Daisy, Tenn., and her husband live within three miles of the two-unit Sequoyah plant.

She said their family plan is based on typical wind patterns. If it's blowing one way, they meet in Dayton; the other way, at her husband's job in town. "He said, `Go this way if it's blowing that way'" she explained, laughing.

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Donn reported from Boston. Associated Press writers Raquel Maria Dillon in Los Angeles; Matt Sedensky in Miami; Josh Funk in Fort Calhoun, Neb.; Jeannie Nuss in London, Ark.; Amy Forliti in Monticello, Minn.; Bill Kaczor in Tallahassee, Fla.; Eric Tucker in Washington; and Bill Poovey in Soddy-Daisy, Tenn., contributed to this report.

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The AP National Investigative Team can be reached at investigate(at)ap.org

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