Emerging markets lend some support to GE outlook

By Nick Zieminski

NEW YORK (Reuters) - In a children's tale, the big bad wolf huffed and puffed but could not blow down the brick house. At General Electric, the wolf might find the BRICs holding up pretty well, too.

As the United States and Western Europe tip into what could be a prolonged recession, emerging economies like Brazil, Russia, India and China -- the BRIC nations -- are expected to continue to grow, albeit at a slower pace.

Sales to emerging markets like China and India have supported GE's recent profits, and look set to continue to offset at least some of the losses in the U.S. conglomerate's financial arms, unless emerging economies veer sharply from their current path, analysts and investors say.

How well these markets hold up may determine the depth of an expected earnings decline at GE next year. Right now, analysts expect 2009 earnings to fall to $1.78 per share from an expected $1.95 a share this year. Morningstar analyst Daniel Holland predicts GE's industrial businesses will grow sales by about 7 percent next year, and profit by about 8 percent.

"There still is a decent amount of growth available in Asian countries," Holland said, adding GE's energy infrastructure business will offset weakness in health-care technology and consumer appliances, the latter a business GE aims to sell.

"Emerging markets are on way better footing than they were in past crises," said Ed Kuczma, investment analyst for Van Eck Global in New York, which manages about $7 billion in assets.

Those economies have kept inflation largely in check, their corporate and government balance sheets are healthy and a strong dollar helps their exports, which in turn supports spending on things like locomotives and power equipment.

A growing middle class and large populations also make infrastructure spending a necessity, not a luxury. Beijing, for example, must generate jobs to maintain social stability and its grip on power.