General Electric Co. topped Wall Street’s profit and revenue forecasts for the first quarter, helped by strong demand for energy equipment and railroad locomotives.
The largest U.S. conglomerate said industrial orders had risen 20 per cent in the quarter and that selling prices had improved in most of businesses. This should help Chief Executive Officer Jeff Immelt achieve his goal of boosting profit margins by a 0.5 percentage point this year.
“We witnessed broad-based strength in orders across all our infrastructure businesses and in both equipment and services,” Mr. Immelt said in a statement.
Investors noted that the company had notched solid organic growth -- a measure that factors out the influence of acquisitions or fluctuations in exchange rates.
“Organic revenue growth in the industrial business was great at 11 per cent,” said Jack De Gan, chief investment officer of Harbor Advisory Corp, a Portsmouth, New Hampshire, firm that owns GE shares. “GE has been a disappointment for a long time ... (and) is now finally going to get back to where its earnings can compound at a rate better than the S&P for a while.”
As of Thursday’s close, GE shares were up 6.6 per cent for the past year, trailing the 10 per cent rise of the Standard & Poor’s 500 stock index.
Investors said the report was a good sign for the rest of the industrial sector. Fellow blue-chip companies United Technologies Corp, 3M Co and Caterpillar Inc are all due to report results next week.
GE “beat on revenues, which they haven’t really been able to do in a long time, and that really bodes well for industrials in particular,” said Kim Forrest, senior equity research analyst of Fort Pitt Capital Group in Pittsburgh.
Fairfield, Connecticut-based GE reported net income of $3.03-billion (U.S.), or 29 cents per share, down from $3.43-billion, or 31 cents per share, a year earlier. The results include a $200-million charge for exiting its Irish mortgage business.
Factoring out one-time items, earnings came to 34 cents per share, topping the analysts’ average forecast of 33 cents, according to Thomson Reuters I/B/E/S.
Revenue at the world’s largest maker of jet engines and electric turbines fell 8.2 per cent to $35.2 billion, but was above the $34.7 billion that Wall Street had anticipated.
The revenue decline reflects the continued scaling back of GE Capital and the sale of a majority stake of the NBC Universal entertainment business to Comcast Corp. Revenue at GE’s industrial businesses was up 14 per cent.
The strongest revenue growth came from GE’s energy and railroad locomotive units.
“What was most impressive was organic growth,” said Perry Adams, senior vice president at Huntington Wealth Advisors in Traverse City, Michigan. “Segment profits were up 14 per cent, and 11 per cent of that was from organic growth -- just a really solid quarter.”
GE has made raising its dividend and buying back shares a top priority for the year, with the goal of paying shareholders back for the $12-billion in common stock that it sold in October 2008 during the financial crisis.
The company wants its GE Capital arm to resume paying a share of its profit back to the parent company this year, subject to approval by the U.S. Federal Reserve, which is GE Capital’s regulator and is completing a review of its financial position.
GE repeated its forecast of “double-digit” profit growth at its industrial units and GE Capital for the year.