GE Rises as Finance Joins Energy to Fuel Earnings Growth
GE climbed 1 percent to $20 at 9:04 a.m., before the start of regular trading in New York. Photographer: Matthew LloydBloomberg
Bloomberg News
GE Rises as Finance Joins Energy to Fuel Earnings Growth
General Electric Co. (GE) (GE) rose after
gains in energy, its biggest industrial business, and finance
fueled higher earnings than analysts estimated.
Earnings from continuing operations advanced to $4.01
billion, or 38 cents a share, greater than the 37-cent average
estimate from analysts. Chief Executive Officer Jeffrey Immelt
said the company is on track to expand profit margins in its
industrial units by 0.3 percentage point to 0.5 percentage point
this year. GE is benefiting from the CEO’s efforts to boost industrial earnings while shrinking the finance arm after $32 billion of credit losses in the financial crisis. GE Capital profit rose 31 percent to $2.12 billion, while energy earnings climbed 13 percent even though wind-turbine demand fell, the Fairfield, Connecticut-based company said today in a statement.
“The industrial businesses are building up some decent momentum that hasn’t been derailed by Europe or the broader economic slowdown,” Matt Collins, an Edward Jones & Co. analyst in St. Louis, said in an e-mail. “The key for the rest of the year is margins. If they meet the guidance and finally start turning around, that should support the stock heading into 2013.”
The company said separately it would divide its energy business, which has about 100,000 employees and makes up about 30 percent of sales, into three separate units. Vice Chairman John Krenicki, who headed the division, will leave at the end of 2012 and the chiefs of the three new units will report directly to Immelt.
‘Logical Position’
“We had kind of a $50 billion company within a company,” after making $11 billion in energy acquisitions through 2011, Immelt said on a conference call with analysts and investors. “The idea to get a little bit faster and more focused on those businesses seemed to be a logical position.”Reorganizing the energy unit, which will take effect in the fourth quarter of this year, will eliminate a layer of management and bring three senior executives within one step of Immelt. Steve Bolze, who leads the GE Power & Water business; Dan Heintzelman, head of GE Oil & Gas; and Dan Janki, in charge of GE Energy Management, will report directly to the CEO once the changes take effect.
GE expects the move will save it $200 million to $300 million in costs, Immelt said on the call, without giving details.
Order Backlog
GE rose 0.4 percent to $19.87 at the close in New York, outperforming declines in the broader Standard & Poor’s 500 Index and Dow Jones Industrial Average. The shares climbed as much as 2.9 percent in intraday trading.Accounting changes included in a U.S. transportation spending bill signed into law by President Barack Obama earlier this month will reduce pension expense by $2.5 billion through 2013, Immelt said on the call.
The industrial division’s order backlog climbed to a record $204 billion from $201 billion in the three months through March, GE said. Orders in those businesses fell 1 percent, dragged down by a 37 percent slide in demand for wind turbines ahead of the scheduled expiration of a U.S. power-production tax credit later this year.
“We prepared ourselves for a pretty tough year this year, certainly a volatile year,” Immelt said on the call. “We haven’t been disappointed.”
Profit declined at the health-care business and the aviation unit, which makes jet engines for airplanes. In the transportation division, which builds diesel locomotives, earnings increased 58 percent to $282 million.
Including $352 million in pension expenses and $553 million in costs from discontinued operations such as the WMC mortgage business sold in 2007, GE’s net income (GE) declined 18 percent to $3.11 billion, or 29 cents a share, from $3.76 billion, or 35 cents. Revenue climbed 2 percent to $36.5 billion, trailing analysts’ estimates of $36.8 billion.
To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net
To contact the editor responsible for this story: James Langford at jlangford2@bloomberg.net
end quote from:
http://www.businessweek.com/news/2012-07-20/ge-profit-tops-estimates-as-finance-growth-joins-energy-gain
A lot of people were hurt who were heavily invested in GE during the 2007 and 2008 downturn of most U.S. Stocks. GE at that time was hurt by its extensive loans during that time with creditors because of losing their jobs and sometimes their homes inability to pay back many loans that had to be totally written off by the Financial wing of GE.
However, within the last year I asked several friends who were knowledgeable investors whether I should sell whatever GE I had still in place. They said, "NO. GE is mostly liquidating it's financial wing and is becoming profitable again worldwide. It is doing well in China and throughout the world and steering almost completely away from loans to customers to buy it's products. Since it has moved back almost completely into manufacturing worldwide it is doing all the right things to become a good investment worldwide. So, it is one of the many U.S. blue chips stocks that might be a hedge against changing currencies. For example, if U.S. currency went down against any other currency, the people in that other currency would buy GE or whatever worldwide blue chip they were interested in. This drives up the value of the stock and acts as a hedge against any devaluations in U.S. currency. So, this makes all good and stable worldwide U.S. blue chips a currency hedge as an investment in addition to a dividend stock which also helps hedge risks in this time of worldwide uncertainty.
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