GE Beats on EPS With GE Capital Driving Results
General Electric (NYSE: GE) 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 percent 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 percent 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 percent 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 percent 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 percent 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 percent 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 percent decline in wind turbine orders. That may have been anticipated somewhat due to a front-end loaded year in the U.S.
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