Thursday , March 06, 2014 - 2:08 PM
NEW YORK -- General Electric Co. posted lower overall revenue and profit in the third quarter, but improving sales of complex industrial equipment gave hope to investors that the company's transformation of its business is succeeding.
GE said Friday that net income fell 9 percent to $3.19 billion and revenue fell 1 percent to $35.73 billion in the third quarter. In last year's comparable quarter, the company earned $3.49 billion on revenue of $36.3 billion. GE's earnings per share dropped to 31 cents, from 33 cents last year.
Still, the company's results exceeded Wall Street expectations on the strength of 11 percent growth in profit at its industrial divisions - those that make aircraft engines, CT-scanners, gas turbines, locomotives and oil and gas drilling equipment.
Adjusted to remove the effects of restructuring and other charges, the company said it earned 40 cents per share. Analysts had expected GE to earn 35 cents per share, on average, according to FactSet.
GE shares rose 4.2 percent, to $25.73, in afternoon trading to the highest level since September of 2008. Back then, shares were plummeting on concerns that GE would not be able to survive intact during the financial crisis because of its enormous banking division.
GE has since sold or reduced the size of its banking operations and other non-industrial businesses such as NBC Universal. The company hasn't yet fully replaced the lost revenue and profit. GE Capital's revenue slipped 5 percent in the third quarter, pulling down the company's overall revenue.
But GE has worked to grow the parts of its business that build and service equipment, products and services sold to utilities, hospitals, oil and gas drillers and aircraft manufacturers around the world. Sales and profit from its industrial units - which both GE and investors are most concerned about - have improved.
"Our business lines are in big infrastructure, the stuff that companies and countries are investing in," Chief Financial Officer Jeff Bornstein said in an interview. "We're getting to the point where we have the mix of businesses we want to go forward with."
GE had predicted that its industrial operations would show strong growth in the later part of this year. Industrial segment profit rose 11 percent to $3.97 billion in the third quarter.
"We're doing double-digit growth in a world that isn't growing double digits," Bornstein said.
GE's aviation, oil and gas, transportation and home and business solutions divisions all grew profit by more than 10 percent. The company's power and water division, which had been hurt earlier in the year by lower sales of wind turbines, posted a 9 percent rise in profit. Health care grew 7 percent, but profit at the company's energy management division declined by 57 percent.
"They are going to have to deliver on better expectations for the (fourth) quarter, but they are making good progress toward that," said Christian Mayes, an analyst at Edward Jones.
GE's global operations give it a close look at the pace of economic growth around the world. The company said its orders improved in Europe, Asia, North America, the Middle East and North Africa, suggesting continued widespread growth, though Latin America and India were relatively weak.
The company said orders rose 19 percent in the quarter to $25.7 billion and that its backlog of future orders hit a record $229 billion.
CEO Jeff Immelt said that will help the company stay on track to improve its profit margin by 0.7 percentage points for the year, and continue to grow in 2014. "We should see earnings growth accelerate in the fourth quarter," Immelt said in a conference call with investors.
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