General Electric Profit Rises Aided By Strong Sales Of Heavy Equipment
General Electric said Friday first-quarter earnings rose, helped by strong demand for heavy equipment, which boosted profit at its infrastructure segment and offset weakness at its plastics and subprime-mortgage businesses.
The Fairfield, Conn., company, whose operations range from jet engines to NBC Universal (the parent of CNBC and CNBC.com), said net earnings rose to $4.51 billion, or 44 cents a share, from $4.44 billion, or 42 cents a share, a year earlier.
Analysts on average had expected profit of 44 cents a share, according to Thomson Financial.
Revenue rose 5.7% to $40.2 billion from $38.03 billion a year earlier. Analysts on average had expected $39.82 billion, according to Thomson.
The strongest profit growth came at GE's infrastructure business, which sells jet engines, electricity-generating turbines and other heavy industrial equipment. Earnings at that segment increased 28%.
"That seemed like an impressive growth on the equipment side, which should bode well down the road," said Craig Hester, chief executive officer of Austin, Texas-based Hester Capital Management, which owns GE shares, in an interview with Reuters.
Profit at GE's Industrial unit fell 20%, while earnings at its Money division slipped 2%.
"The sooner they get rid of the plastics business, the better off they'll be. That was obviously a penalty for them," said Douglas Ober of Adams Express
Mortgages A 'Challenge'
GE Money's earnings were tempered by challenges at its U.S. mortgage business. However, in a press release, GE Chief Executive Jeff Immelt said he expects performance at the company's WMC Mortgage business to "rebound" in 2007.
Last month, WMC, which lends to less-creditworthy homebuyers, laid off about 20% of its work force and stop making new loans to people who do not make down payments.
Ober said he was pleased to see the subprime troubles didn't take too much of a toll on results.
"The GE Money business, which everybody thought was a potential hurting spot, didn't seem to bother them too much," Ober said. "So I was pleased with that."
In addition, GE's healthcare operations were hurt by a temporary regulatory suspension oon shipments of its surgicial supplies.
"Our ability to deliver such a solid quarter with these short-term headwinds truly demonstrates the breadth, strength and diversity of our businesses," Immelt said, in a press release.
GE expects to report second-quarter earnings of 52 cents to 54 cents a share from continuing operations. Analysts on average expected 53 cents, according to Thomson Financial.
"It should be reassuring to those who are worried about the economy," James Hardesty, president of Hardesty Capital Management, told Reuters. "This is a wonderful proxy for the economy telling us things are fine."
The world's second-largest company by market valuation, behind Exxon Mobil
But GE shares have lagged the major U.S. financial indexes this year. They are down 5.5% so far in 2007, while the blue-chip Dow Jones industrial average, of which GE is a component, is up 0.7%.