(Reuters) - General Electric Co reported better-than-expected earnings, helped by the recovery of its finance arm and a rise in revenue at its industrial units, including a sharp pickup in sales of locomotives.
The world’s biggest maker of electric turbines and jet engines also reported a 12 percent rise in orders, driving its backlog — a key predictor of future sales — to $175 billion.
GE reported fourth-quarter profit from continuing operations of 36 cents a share, above the 32 cents analysts had expected. Revenue of $41.4 billion exceeded analysts’ estimates for $39.9 billion.
GE shares rose 2 percent in premarket trading.
Following are reactions from industry analysts and investors:
PERRY ADAMS, VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER, HUNTINGTON PRIVATE FINANCIAL GROUP, TRAVERSE CITY, MICHIGAN
“They had a very good quarter. If you look at GE Capital, they earned $1.1 billion, and management expects to have GE Capital paying a dividend (to the parent company) in 2012, so this definitely bodes well there.
“Organic growth on the industrial side was good. Orders were strong, backlogs were strong. There is a lot of positive news in this release. Their emerging market drive is getting good results, in terms of the announcements with China and Russia.
“A focus on the call today will be the deployment of cash. They have said they’ll take a balanced approach — raising the dividend, buybacks, M&A. There will be a focus on how they will deploy their cash.
“It’s pretty consistent with what they thought would be the drivers for 2011, and that was transportation had a good quarter, healthcare and then technology infrastructure.
“It’s the economy at large. If you look at developing nation growth, GDP is expected to grow 7 to 9 percent. In developed nations it’s more modest but still expected to be in the 2 to 3 percent range. That reflects a growing economy and GE is well positioned for that.”
RICK MECKLER, PRESIDENT, LIBERTYVIEW CAPITAL MANAGEMENT, NEW YORK
“I didn’t think there is anything not to like about the numbers, but by the same token given the recovery in the economy and the recovery in financial stocks you’d be surprised not to see GE be on that path.
“I think what most investors are really trying to see is the growth numbers. They certainly looked OK on paper. I think the conference call will go a long way to better understanding it. This is a company that has really changed its focus away from the domination of GE Capital, which undoubtedly grew too large.
“The other factor that people will look at is the stock has recovered quite a bit in anticipation of this and whether there is enough here to keep the momentum going, My guess is it will, but it also won’t surprise me if investors rest here, waiting for the next leg of GE’s recovery before committing new funds to it.”
“Results are satisfactory. On balance, the story coming out of quarterly results is reasonably promising. The (stock) market is going to remain reasonably solid. We have seen a natural progression over time in this recovery toward a solid underpinning.
“GE is quite an interesting one as it is much more diversified company and a good bellwether for the economy generally. It’s telling us that the fundamental backdrop for companies is pretty good.”
JACK DE GAN, CHIEF INVESTMENT OFFICER, HARBOR ADVISORY CORP, PORTSMOUTH, NEW HAMPSHIRE
“The most exciting thing is the return to organic revenue growth. They used to really tout that. The last two or two and a half years, organic revenue growth has been negative, and this is the first quarter that it’s flipped positive.
“GE is a proxy for the economy in general and the industrial economy in particular. Manufacturing jobs in the country grew for the first time in 12 or 13 years last year. The industrial economy is improving, and GE is a proxy for that.
“The only thing that is less than stellar is services orders, up 5 percent. Services is a great business for GE because its margins are higher than the company average and it’s recurring. Most of these are long-term maintenance and support contracts, nice streams of income coming from monitoring, maintaining things like gas turbines and jet engines. They’d really like to grow that business faster than that. It may be a one-quarter thing, but that’s not an impressive number for that business. It may just be a product-mix thing.
“Problems at GE Capital are coming down quicker. Delinquencies are coming down quicker, commercial real estate is improving. They’re more optimistic on the industrial businesses. You can tell they feel like they’re playing offense now, not defense. I think we’re going to be surprised throughout the year on earnings. By the end of the year, analysts will have been low by 10 cents on the company and the same the following year.
“I think we’re going to start to see the GE of old, where we can count on them not missing and we can expect good things both from the releases but also from a capital allocation standpoint. I think we’ll see another dividend increase next year. We’ll see stock buybacks. We’ll see a resumption of the upstream dividend payment from GE Capital to the parent company.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, AVALON PARTNERS, NEW YORK
“GE came in a bit better than expected and it is obviously helping the futures this morning. It is sparking a good mood for the market today and for the rest of the earnings season. This could lead the market to reverse some losses that we had in the past few days and it gives momentum to the bull trend again.”
Reporting by Angela Moon, Nick Zieminski and Edward Krudy in New York, Scott Malone in Boston and Atul Prakash in London