GE tops estimates on overseas demand
General Electric Co (GE-N) notched a better-than-expected 21.6-percent rise in earnings, helped by strong demand for equipment used in oil and natural gas production and jet engines.
The largest U.S. conglomerate said Friday its second-quarter results were helped by a rebound in sales of railroad locomotives, which offset weakening demand for wind turbines. With overall orders up 24 percent, pushing the company's backlog to $189 billion US, Chief Executive Jeff Immelt said he was confident about the rest of the year.
"We are optimistic about our growth prospects in the second half and beyond," Immelt said.
The company's industrial revenues outside the United States were up 23 percent in the quarter, outperforming the overall company, which recorded a 7-percent rise in sales from continuing operations.
Investors said the results showed the Fairfield, Connecticut-based company's focus on emerging markets was paying off.
"GE's strategy of growth in developing nations and energy and infrastructure and healthcare and technology is serving it well," said Perry Adams, vice president and senior portfolio manager at Huntington Private Financial Group, in Traverse City, Michigan, which holds GE shares.
The rise in orders is a key sign that GE will be able to continue its pace of growth, said Nick Heymann, an analyst at William Blair & Co.
"That's the path back to the future," he said.
Profit fell 19 percent at the company's energy unit, which incurred large costs to integrate the $11 billion wave of takeovers it made between September and March. Profit margins on renewable energy equipment deteriorated. Demand was split, with sales of equipment used in oil and natural gas production up 39 percent, and electricity-producing gear up just 1 percent.
"If oil keeps going up and if Congress and the president do something more on renewables, which they keep talking about but haven't done, then margins have a long way to expand," said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire. "They're doing well to keep margins in those businesses as good as they are."