General Electric Co. reported a 13-per-cent jump in quarterly net income Friday on improved sales of its jet engines and oil and gas equipment, and said it was targeting the initial public offering of its private-label credit-card business for the end of the month.
The U.S. conglomerate has been planning a partial IPO of the North American retail finance business, to be called Synchrony Financial, as part of a plan to exit the business and slim down its overall GE Capital unit.
GE expects a 15 per cent offering would be worth about $3.1-billion (1.8 billion pound) at the mid-point of the IPO, according to a company presentation. It plans to retain about $17-billion of the business, with a full separation targeted for late next year.
The spin-off is a key part of Chief Executive Officer Jeff Immelt’s plan to boost GE’s earnings contribution from its industrials businesses to 75 per cent by 2016, from 55 per cent last year. Toward that end, GE last month agreed to buy the power turbine and other energy assets of France’s Alstom for $16.9-billion, its biggest-ever deal.
“GE has always been a steady re-allocator of portfolio assets,” said Tim Ghriskey, chief investment officer with Solaris Asset Management, which owns GE shares. “It’s nice to see that pick back up ... To me, that’s what can really move the stock.”
GE’s second-quarter net income rose to $3.55-billion, or 35 cents per share, from $3.13-billion, or 30 cents a share, a year earlier.
Excluding items, operating earnings of 39 cents a share matched the average estimate of analysts, according to Thomson Reuters I/B/E/S.
Revenue rose 3.4 per cent to $36.23-billion, slightly below the $36.3-billion expected by analysts.
Sales rose 15 per cent for its aviation segment, and 20 per cent for its oil and gas unit.
Overall, revenue for GE’s industrial businesses rose 5 per cent, excluding acquisitions, and the company kept its forecast of organic industrial revenue growth of 4 per cent to 7 per cent for the year.
GE’s profit margin for its industrial businesses, a closely watched barometer by Wall Street, expanded 0.2 percentage point to 15.5 per cent.
The company’s backlog of equipment and service orders rose 10 per cent to $246-billion. Orders for new equipment in the quarter dipped 3 per cent, after also declining in the first quarter, although service orders rose 14 per cent.
GE last month prevailed in a two-month battle to acquire Alstom’s power assets, fending off initial French government resistance and a bid from rival industrial giants.
The deal is expected to close in 2015 and add 6 cents to 9 cents per share to earnings in 2016, the company said Friday. Analysts expect GE to earn $1.97 per share in 2016.
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