GE Beats on EPS With GE Capital Driving Results

General Electric

reported better-than-expected Q2 earnings Friday, driven by its GE Capital business, a passing grade for the largest U.S. industrial company. Shares rose 10 cents to $19.90 in premarket trading, working against stock index futures that pointed slightly lower. Earnings excluding items rose to $4.01 billion, or 38 cents a share, up 7% from $3.75 billion, or 34 cents a share in the same quarter last year. Analysts had been expecting earnings of 37 cents, on average. GE reaffirmed its double-digit profit growth expectation for the year, perhaps providing some tacit sentiment support for the manufacturing industry. Revenue rose 2.5% to $36.5 billion, slightly shy of analyst expectations of $36.8 billion. “We are executing our growth strategy in the midst of a still volatile global economy,” said CEO Jeffrey Immelt in a statement. “We achieved orders expansion in growth markets of 14 percent.” Yet it was GE Capital that accounted for more than half the company's profit: $2.12 billion, up more than 30% from the year-ago quarter. That group's real estate business was partly a driver, contributing $221 million in profit. GE Capital also saw a lower-than-expected 4.6% tax rate that contributed an extra penny of per-share earnings. GE continues to try to shrink its capital business by selling assets. Revenue for the unit fell 8% to $11.64 billion. As much as investors may welcome a stronger-than-expected profit from GE Capital, it also works against the company's broader goals to rely less on that unit going forward. The company's industrial business reported 10% revenue growth not counting acquisitions, and built a record backlog of $204 billion, up from $201 billion in Q1. Operating profit for the unit was $33 million. Demand for energy production equipment remained strong. One of the biggest disappointments was a 37% decline in wind turbine orders. That may have been anticipated somewhat due to a front-end loaded year in the U.S.