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
Its backlog for everything from jet engines to locomotives
to turbines jumped nearly 13 percent compared with the year-ago
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
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,"
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
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
The company said it had already reached its goal of reducing
costs in its industrial businesses by about $1 billion this