General Electric Co. reported a better-than-expected 7.5-per-cent rise in fourth quarter profit and a sharp increase in its backlog of equipment orders, sending shares up in premarket trading.
GE, the largest U.S. conglomerate, notched strong earnings growth at units that make jet engines and equipment used in oil and gas production, with results benefiting from chief executive officer Jeff Immelt’s efforts to boost its presence in the energy industry in recent years.
The order backlog, watched by investors as an important indicator of future sales growth, hit $210-billion in the fourth quarter, up from $203-billion in the third quarter.
“The backlog was a really good number. I didn’t expect to see a $7-billion, 3.5 per cent rise in the backlog,” said Jack De Gan, chief investment officer at Harbor Advisory Corp., which holds GE shares. “Orders in the fourth quarter must have been really good for the industrial side.”
Solid demand in China and oil-producing countries helped to offset unsteady economies at home and in Europe, Mr. Immelt said.
“The outlook for developed markets remains uncertain, but we are seeing growth in China and the resource rich countries,” Mr. Immelt said in a statement.
GE, the world’s biggest maker of jet engines and electric turbines, said fourth-quarter earnings rose to $4.01-billion, or 38 cents per share, from $3.73-billion, or 35 cents per share, a year earlier.
Factoring out one-time items, profit came to 44 cents per share, a penny ahead of analysts’ estimates, according to Thomson Reuters I/B/E/S.
Revenue rose 3.6 per cent to $39.33-billion from $37.97-billion a year earlier. Analysts expected revenue of $38.76-billion.
Profit increased across all divisions, with the jet engine unit notching 22-per-cent growth and GE Oil and Gas, which makes equipment used in energy production, up 14 per cent.
Profit at the GE Capital finance arm, in the process of being scaled back, rose 6 per cent.
“They saw some good organic growth in the industrial part of their business. GE Capital was a strong contributor,” said Oliver Pursche, president of Gary Goldberg Financial Services, a GE shareholder.
Over the past few years, Fairfield, Conn.-based GE has boosted its position in the energy industry, broadening its lineup of equipment used in oil and gas production and mining, with an eye toward capitalizing on surging U.S. natural gas production. GE also makes medical equipment and railroad locomotives.
At the same time, Mr. Immelt has made cost-cutting a major thrust across the company, with an eye toward raising operating profit to about 15.8 per cent of sales by the end of 2013.
At Thursday’s close, GE shares were up about 12 per cent during the past 12 months, topping the 9 per cent rise in the Dow Jones industrial average.
GE kicks off a wave of earnings reports from the nation’s largest manufacturers, with United Technologies Corp, 3M Co and Honeywell International Inc. all due next week.