By Lewis Krauskopf and Ernest Scheyder
Oct 18 General Electric Co on Friday posted a record backlog of orders that the company said positioned it well for 2014, lifting shares and overshadowing a decline in quarterly profit and revenue.
Chairman and Chief Executive Jeff Immelt sounded an optimistic tone to end a week of economic uncertainty over the debt ceiling debate in Washington, saying the conglomerate's results were "very strong in an improving global business environment."
Its backlog for everything from jet engines to locomotives to turbines jumped nearly 13 percent compared with the year-ago quarter.
Earnings increased at six of GE's seven industrial businesses, and the company said it was on track to achieve its target for expanding profit margins for the year.
GE shares rose 4 percent to $25.68 in afternoon trading, touching their highest point since the 2008 financial crisis.
"It's slow but steady progress at GE, and that's a good thing," said Tim Ghriskey, chief investment officer at Solaris Asset Management, which owns GE shares.
Orders grew 18 percent in the United States and 17 percent in Europe, helped by bookings for products such as wind turbines and oil pumps.
"Given the backdrop, I think infrastructure as a segment has been pretty strong in both U.S. and Europe," Chief Financial Officer Jeff Bornstein said in an interview.
China orders also rose 17 percent, with bookings reflecting "what the Chinese have focused on in terms of building out their economy," Bornstein said, including renewable energy, moving from coal to gas, and upgrading hospitals with medical diagnostic equipment.
GE is benefiting from global economic themes such as greater air transport and need for electrical generation, but it was unclear the extent to which other companies' results would show signs of the world economy heating up.
"I think you're going to see a really mixed bag of what people's experiences are going to be in the third quarter," Bornstein said.
GE's net income fell to $3.19 billion, or 31 cents per share, in the third quarter, from $3.49 billion, or 33 cents per share, a year earlier.
Excluding one-time items, earnings of 36 cents per share topped the average estimate of analysts by a penny, according to Thomson Reuters I/B/E/S.
Revenue fell 1.5 percent to $35.7 billion. Analysts looked for nearly $36 billion.
Revenue was weighed down by its GE Capital finance arm, which the company is shrinking, and a $132 million toll from the negative impact of foreign currency translation.
Among GE's seven industrial segments, its oil and gas and aviation lines posted revenue increases of 18 percent and 12 percent, respectively, offsetting a 10 percent decline in its power and water unit that makes a variety of turbines.
Still, the power and water business, which has been a drag on results, recorded a 9 percent gain in earnings and performed better than several analysts expected.
"The turbine business is looking up," Ghriskey said. "It certainly has taken a hit. But that should improve next quarter and into 2014."
The company's accumulated backlog of service and equipment orders rose to $229 billion, up $6 billion from the second quarter. Equipment orders for its aviation division nearly doubled in the quarter, while transportation equipment orders jumped 65 percent.
GE pointed to a roughly $600 million order in the quarter to provide turbomachinery equipment to Russia's Yamal liquefied natural gas project and an order from Air Asia for 528 engines.
Last month, GE unveiled a $1.9 billion agreement with Algeria's Songelaz to supply power generation equipment, but that order will not be booked until starting in the fourth quarter.
GE said it was on track to reach its target of expanding operating profit margin for its industrial businesses by 0.7 of a percentage point - to 15.8 percent this year from 15.1 percent in 2012. In the third quarter, the profit margin improved by 1.2 of a percentage point from a year ago.
"Industrial margins, which is really an earnings driver, were much stronger than expected," said Jack Degan, chief investment officer at Harbor Advisory Corp, which owns GE shares.
The company said it had already reached its goal of reducing costs in its industrial businesses by about $1 billion this year.