UPDATE 4-GE sees strong earnings growth in 2011

* Sees 2011 revenue flat to up 5 percent

* CEO Immelt: "earnings will be up next year strongly"

* Says performance continues to strengthen in Q4

* Shares up 0.4 pct (Adds Immelt and analyst comments, background)

By Scott Malone

NEW YORK, Dec 14 (Reuters) - General Electric Co (GE.N) said on Tuesday demand for its industrial products and sales in China will allow it to post strong profit growth in 2011, even as margins come under pressure from costs related to research and acquisitions.

It forecast 2011 sales would be flat to up 5 percent, ahead of Wall Street estimates for slightly lower sales next year.

"At the end of the day, it's about the revenue," said analyst Brian Langenberg of Langenberg & Co. "This is reasonable revenue guidance."

Langenberg he expected GE shares to reach $22 within a year and $35 within three years.

GE, whose products range from wind turbines and industrial technology to machines used in hospitals and a large financing arm, has been counting on strong growth outside the United States, particularly in China, India and the Middle East, to offset a sluggish recovery at home.

Sales in China will be in the high double digits in 2011, it said. Its industrial businesses will grow next year and accelerate in 2012, GE said at an annual forecast meeting for investors and analysts.

"Things are definitely getting better, we're seeing it across the portfolio right now," said Jeffrey Immelt, chief executive of the largest U.S. conglomerate. "The performance is strengthening in the fourth quarter and we see good momentum as we go into 2011 and beyond."

Immelt added: "GAAP earnings will be up next year strongly, operating earnings will be up next year strongly."

Analysts on average expect the company to post 2011 profit of $1.27 per share, up 13 percent from expected 2010 levels, on revenue of $145.4 billion, down 3 percent.

Fairfield, Connecticut-based GE has ceased providing specific per-share profit targets, instead offering a "framework" of how it expects its businesses to perform. Immelt said he did not expect to resume EPS guidance, despite improved visibility.

Although the company said profit margins would be lower in 2011 because of acquisition costs and research and development spending, Immelt said his vision for its industrial units was to grow at a multiple of GDP and expand margins at the same time.

"The arithmetic just works that we should be able to grow earnings at 10 percent, said Immelt, who in 2011 will mark his tenth year as GE's CEO. "Let's see where the economy goes."

IMPROVING VIEW

GE's forecast follows several recent signs an economic recovery is gathering steam, even though unemployment remains high in many large economies, including the United States. U.S. retail sales increased for a fifth straight month in November, the start of the holiday season. [ID:nN14261708]

Corporate America's view of the economic recovery has been gradually improving over the past few months.

Last week, fellow blue-chip manufacturers 3M Co (MMM.N) and United Technologies Corp (UTX.N) said they were looking for profit to rise about 10 percent next year at their midpoints.

Earlier on Tuesday, the Business Roundtable reported that CEO confidence in the economy spiked to a four-year high in December, with some 80 percent of corporate chiefs expecting sales to rise over the next six months. [ID:nN14268951]

"As I think about 2011, I feel a lot better than I've felt in the last two years, in terms of what's going on in the global marketplace," Greg Hayes, chief financial officer at United Tech, told investors on Tuesday.

Immelt said GE planned to buy back Berkshire Hathaway Inc's (BRKa.N) preferred stake in the company by next October. GE sold a $3 billion preferred stake to Warren Buffett's Berkshire in October 2008.

GE also said it aimed to maintain an attractive dividend payout and that it aims to increase operating earnings at least as quickly as its S&P 500 peers.

Its stock closed up 7 cents at $17.69.

"There were no new specifics today to get the stock moving again," said analyst Matt Collins of Edward Jones, adding that GE tipped its hand last week when it raised its dividend by 2 cents to 14 cents per share.

It was the second rise in the payout of the year for a total increase of 37 percent. The increase, which had been widely expected, partially reversed the sharp cut in the dividend from a 31 cent quarterly rate during the financial crisis, a move the company said was necessary to protect its cash.

MORE DEALS?

GE also said it remained interested in complementary acquisitions, preferably ones between $1 billion and $3 billion in size.

The company has also been active on the takeover front this year, most recently on Monday reaching a revised deal to acquire Wellstream Holdings Plc WSML.L for $1.3 billion to boost its presence in the oil-services sector.

GE officials have said the company could spend up to $30 billion on acquisitions in the next few years as Immelt refocuses GE on its industrial core, after reaching a deal to sell its NBC Universal media business to No. 1 U.S. cable operator Comcast Corp (CMCSA.O) and scaling back the GE Capital finance arm.

"The company is winding down its restructuring mode. The fact that they're talking about growth at all is modestly above where many analysts have been," said Keith Goddard, manager of the Capital Advisors Growth Fund which owns GE shares.

"Investors are in a position to have a much higher level of confidence in the numbers," Goddard said, adding he liked the company's characterization of "a multispeed world" where GDP growth rates differ widely.

GE next year will begin reporting operating results, which exclude some noncash pension expenses, as its primary measure of performance, Immelt said. Honeywell International Inc (HON.N) changed its approach to pension accounting this month in an effort to make its results more comparable to peer companies.

Honeywell is due to lay out its expectations on Wednesday. (Additional reporting by Nick Zieminski and James Kelleher; editing by John Wallace, Matthew Lewis and Andre Grenon)