* Q4 adjusted profit of 44 cents tops 43 cent Wall St view
* Revenue up 3.6 percent, better than expected
* Company will have tens of billions to redeploy or pay out
* Order backlog hits record high $210 billion
* Likely to stick with annual dividend evaluation -- CFO
By Scott Malone
Jan 18 What's Jeff Immelt going to do with the
General Electric Co shareholders are wondering what
the company's chief executive plans to do with a cash windfall
that could total tens of billions of dollars over several years
as the company sells its remaining stake in NBC Universal and
recoups more of the profits earned by finance unit GE Capital.
Last year GE Capital sent $6.4 billion back to the company's
headquarters in Fairfield, Connecticut. Analysts estimate that
the unit could generate a similar amount of cash this year.
But GE could get an even bigger infusion in mid-2014, when
it is set to cash in on its option of selling the rest of its
stake in NBC Universal to Comcast Corp. The stake is
currently valued at roughly $17 billion, but the final price and
timing of the deal could vary.
Immelt spoke with investors on Friday in a conference call
after GE posted earnings that rose 7.5 percent from a year
earlier, beating expectations.
During the call, the CEO of the largest U.S. conglomerate
was cagey about his spending plans. He did not venture far
beyond his often-repeated mantra that GE's priorities were
balanced between raising its dividend, buying back shares and
doing some small takeovers.
"This company is going to have a ton of cash over the next
three years, right?" Immelt said. "I don't really want to make
any other pronouncements other than disciplined and balanced
capital allocation. We'll go over the other bridges as we get
there but let's start with that."
GE shares were up 3 percent on a day that major U.S. stock
indexes barely budged.
In January 2011, GE sold a majority stake in NBC to Comcast
back. About that time, GE embarked on a $12 billion wave of
acquisitions of smaller makers of energy equipment. That is a
pattern that could repeat itself, suggested Jeff Sprague,
analyst with Vertical Research Partners.
"They do need to redeploy that cash in a way that, at a
minimum, preserves and ideally enhances the earnings profile,"
Sprague said. The company might consider deals to build up its
newly created $7.4 billion Energy Management division, which
makes equipment used to transmit electricity.
The company would do well to stick with Immelt's stated goal
of aiming for targets worth about $1 billion to $3 billion,
"If they can keep it in that smaller range, smaller for them
at least, you just lower risk," he said. "It's more digestible."
Immelt's plans for the money also include continuing to
raise its dividend and buy back shares.
Investors suggested that Friday's better-than-expected
fourth-quarter earnings report could prompt the company to again
boost its dividend, which it raised by 12 percent in December.
"Are they going to be in a position in the second quarter,
perhaps if they perform so strongly again, to raise their
dividend?" asked Oliver Pursche, president of Gary Goldberg
Financial Services in Suffern, New York.
Chief Financial Officer Keith Sherin said the company did
not plan to boost its payout quite so often.
"Our historical pattern was to do dividend increases at the
end of the year by reviewing capital allocation plans with the
board of directors and I would think that would continue to be
our practice," he said in an interview.
The company's four increases from July 2010 through Dec.
2011 were a special case, intended to make up for a sharp cut to
the payout during the financial crisis.
Peter Sorrentino, senior vice president and portfolio
manager at Huntington Asset Advisors in Cincinnati, suggested
that GE should not try to reinvest all the money it gets when it
sells the remainder of NBC to Comcast. Instead, he said the
company should consider paying more out in dividends and
"Let's benefit shareholders who've stayed the course over a
long period of time," Sorrentino said. "Better to be lean and
focused. Target new growth markets, but let's not continue to
carry the size of the enterprise just because that's what we've
The long languor of GE's shares stands as one of
shareholders' main complaints about Immelt's tenure. While GE's
12 percent rise over the past year outpaced the 9 percent rise
of the Dow Jones industrial average, it trades well below
the $42 mark reached in 2007 before the financial crisis. The
broader U.S. stock market also remains below its pre-crisis
GE, the world's biggest maker of jet engines and electric
turbines, reported that its order backlog -- a closely watched
indicator of future sales -- hit a record high $210 billion in
the fourth quarter, up from $203 billion in the third quarter.
"The backlog was a really good number. I didn't expect to
see a $7 billion, 3.5 percent rise in the backlog," said Jack De
Gan, chief investment officer at Harbor Advisory Corp, which
holds GE shares. "Orders in the fourth quarter must have been
really good for the industrial side."
Orders were up 2 percent, and would have been up 7 percent
factoring out a sharp drop in demand for wind turbines related
to the expected expiration of a tax credit, as well as
GE shares were up 3 percent to $21.94 in early Friday
afternoon trading on the New York Stock Exchange. The Dow Jones
industrial average and the S&P 500 were up slightly.
Fourth-quarter earnings rose to $4.01 billion, or 38 cents
per share, from $3.73 billion, or 35 cents per share, a year
Factoring out one-time items, profit came to 44 cents per
share, a penny ahead of analysts' estimates, according to
Thomson Reuters I/B/E/S.
Revenue rose 3.6 percent to $39.33 billion from $37.97
billion a year earlier.
Solid demand in China and oil-producing countries helped GE
to offset unsteady economies at home and in Europe, Immelt said.
"We saw real strength in the emerging markets and the
developed regions stabilized," Immelt told investors.
GE kicks off a wave of earnings reports from the nation's
largest manufacturers, with United Technologies Corp, 3M
Co and Honeywell International Inc all due next