NEW YORK (Reuters) - General Electric Co (GE.N) expects to hit its 2016 earnings targets despite tough conditions in its oil and gas business, lower industrial margins and slower revenue growth, Chief Executive Jeff Immelt said on Wednesday.
Immelt affirmed the diversified industrial company’s target of $1.45 to $1.55 per share this year in a presentation at the Electrical Products Group conference in Florida.
But GE’s industrial segment profit growth will fall to 5 percent in coming years from a recent annual average of 6 percent, and industrial profit margins will decline to a range of 14 to 14.5 percent this year from 14.8 percent in 2015, he said.
Excluding the lower-margin Alstom business GE acquired last year, GE’s industrial profit margins were 15.3 percent in 2015 and are expected to rise to 15.8 percent this year, GE said.
Asked if margins will fall in 2017 when GE ramps up production of its LEAP aircraft engine with partner Safran SA (SAF.PA) of France, Immelt said he expected GE to maintain or increase aviation business margins during that period.
“I’d be really horribly disappointed,” Immelt said. “The LEAP is a big launch. But you have real adults that are doing this. They’re as good a technical, manufacturing, engineering team as I’ve ever seen.”
Immelt saw further pressure from low oil and gas prices, which have depressed sales of GE’s prospecting and development equipment. The market likely will stabilize in 2017 before it grows again, Immelt said.
But he said he expected “very strong orders” in the second half of 2016 from other businesses, including power generation, renewable energy and services.
GE shares were little changed after the presentation, down 11 cents at $29.60.
Reporting by Alwyn Scott; Editing by Richard Chang and Andrew Hay