February 25, 2024

G.E. Posts Earnings That Exceed Forecasts and Raises Dividend

The results easily topped the forecasts of Wall Street analysts, but its shares ended 2.2 percent lower on Thursday, reflecting concern about a decline in industrial margins, some analysts said.

G.E. said net income was $3.4 billion in the first three months of 2011, or 31 cents a share, compared with $1.9 billion and 17 cents in the quarter a year ago. Excluding one-time items, earnings were 33 cents a share, exceeding the average estimate of 28 cents from analysts surveyed by Thomson Reuters.

Earnings from continuing operations were $3.5 billion compared with $2.4 billion in the period a year ago.

The chief executive, Jeffrey R. Immelt, said in a statement that G.E. had emerged from the recession a stronger company.

“G.E. health care, transportation and aviation delivered strong results,” Mr. Immelt said. “Strategic investments in high-growth segments have strengthened the company’s energy portfolio and position that business to return to growth in the second half of this year.”

Over all, revenue rose 6 percent, to $38.45 billion in the first quarter, exceeding analysts forecasts of $34.64 billion. Revenue in the same quarter a year ago was $36.2 billion.

The results and outlook reflected the company’s efforts to diversify and make acquisitions, while trying to build its businesses in crucial sectors like energy. On Thursday, the company described itself as “cautiously optimistic” about the gas turbine business, with strong orders from the Middle East and plans to help Japan meet its energy demands after its nuclear plant was damaged in the March 11 earthquake and tsunami.

“Our teams are working diligently to support our customers in Japan,” Mr. Immelt said in a conference call.

Early this month G.E. announced plans to build the nation’s largest photovoltaic panel factory, with the goal of becoming a major player in the market.

G.E. also completed the sale of 51 percent of NBC Universal to the Comcast cable network in the quarter, which resulted in an after-tax gain of 4 cents a share. In the deal, Comcast paid General Electric nearly $6.2 billion in cash and contributed its pay television channels like E Entertainment Television and the Golf Channel, worth $7.25 billion, to NBC Universal.

General Electric said when announcing its last results in January that it had a backlog of orders that positioned it for growth in 2011, with the transportation, health care and finance units expected to lead in earnings. On Thursday, Mr. Immelt said the backlog, a gauge of future results, was $177 billion.

Richard Tortoriello, an equity analyst with Standard Poor’s, said the orders numbers suggested growth in the global economy, particularly in emerging markets like Brazil, China and India.

“G.E. is a bellwether in the sense that they are one of the largest industrial companies out there, but they have a larger proportion of what you might call long cycle business than others,” Mr. Tortoriello said.

“We are not taking off like a rocket ship,” he said, “especially with regard to the U.S. and Europe, but the growth is there.”

The company, which is based in Fairfield, Conn., also raised its quarterly dividend by a penny, to 15 cents, beginning in the third quarter, the report said. It increased its dividend twice in 2010. In July, the dividend was raised to 12 cents a share from 10 cents, and in December it was increased further, to 14 cents. The company paid 31 cents a share until February 2009, when, for the first time since the Great Depression, the board cut the dividend to conserve cash.

Timothy A. Hoyle, a vice president at Haverford Investments, said the potential for a dividend increase was apparent in 2010 as the company’s capital unit returned to normal and as it finished a deal involving the sale of NBC Universal. “We saw plenty of excess capital generation,” Mr. Hoyle said. “That is happening.”

But he also noted that G.E. had said it had a decline to 14.3 percent in industrial operating margins because of weakness in the energy sector, partly as a result of lower wind turbine pricing.

The company’s shares fell 45 cents, or 2.21 percent, to close at $19.95 on Thursday.

While G.E. is a household name as a manufacturer of common household products like lights bulbs and electric fans, it also has a diverse portfolio of finance and business units.

Its lending division, GE Capital, the nation’s largest nonbank financial institution, has provided more than half of G.E.’s profit in some recent years. But the unit was struggling amid the fallout from the collapse of the real estate market, and Mr. Immelt has tried to refocus G.E. more toward the industrial sector.

The company said GE Capital reported net income of $1.8 billion in the first quarter, up from $583 million in the period a year ago.

“With losses having peaked, we are originating new business at attractive margins and our funding costs continue to be favorable,” Mr. Immelt said of GE Capital.

Article source: http://www.nytimes.com/2011/04/22/business/22electric.html?partner=rss&emc=rss

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