General Electric Co called the end to its two-year slump on Friday, reporting earnings that beat Wall Street forecasts and saying profit should rise through the rest of 2010. The largest US conglomerate - whose shares eased 2.5 percent, erasing some of the almost 5 percent they had gained over the past week - said the worst was behind its beleaguered finance arm.
The world's biggest maker of jet engines and electricity-producing turbines disclosed a 24 percent drop in orders for new energy equipment and a 21 percent drop in orders for new aviation equipment. Some investors expressed concern about the 8 percent overall decline in orders and a sharper-than-forecast revenue decline, raising concerns about the sustainability of the company's turnaround after a slump that shook confidence in the sole original member remaining in the Dow Jones industrial average.
"They blew away the bottom line number, and it's tough to find fault with it, but the revenue number is light," said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati, which holds GE shares in its portfolios.
But he was concerned that the backlog remained constant. "I'm not seeing a big pickup in orders here so I'm a little bit concerned about the pace of activity," he added. GE said its total order backlog - an indicator of future sales of big-ticket items like jet engines and electricity-producing turbines - held steady at $174 billion.
"We are leading a renewed GE," said GE Chief Executive Jeff Immelt, who has engineered a major shift in GE's portfolio of businesses, including pruning GE Capital and agreeing to sell a majority stake in NBC Universal to No 1 US cable operator Comcast Corp. "We expect to grow earnings and dividends in 2011 and beyond."
GE, which also builds wind turbines and loans money to mid-sized businesses, reported net income attributable to common shareholders came to $1.87 billion, or 17 cents per diluted share per share, down 32 percent from $2.75 billion, or 26 cents per share, a year earlier.
Profit from continuing operations came to 21 cents per share, above the 16 cents analysts had expected, according to Thomson Reuters I/B/E/S. Revenue declined 5 percent to $36.6 billion. That was less than the $37.1 billion analysts had forecast. "This is the low water mark for the year, for the cycle. They're delivering. They're shrinking GE Capital," said Keith Goddard, president of Capital Advisors Inc in Tulsa, Oklahoma, which owns GE shares.
"You're finished worrying where's the bottom in GE's earnings power. That was it." The company, which also makes railroad locomotives and CT-scan machines, no longer provides investors with numeric per-share profit targets, instead offering a "framework" of how it expects its individual divisions to perform.
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