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GE Profit Rises 14%, Helped by Turbine Sales

Reuters
Friday, 12 Oct 2007 | 8:42 AM ET

General Electricsaid Friday that third-quarter profit rose 13.8 percent, matching expectations, boosted by demand for heavy equipment like gas turbines and jet engines and strength at its financial units.

GE
GE

The conglomerate said earnings increased to $5.54 billion, or 54 cents per diluted share, from $4.87 billion, or 47 cents per diluted share, a year earlier.

Profit from continuing operations was 50 cents per share, in line with analysts' expectations, according to Reuters Estimates.

"Given the significant slowdown that we are seeing in the economy and all the dislocation in the financial markets, I think it is a positive just to report an in-line quarter and reaffirm guidance, not to take guidance down," said Shawn Campbell, principal at Campbell Asset Managementin Chicago that holds GE stock. "One of the key things is no nasty surprises on the finance side."

GE , the second-largest U.S. company by market capitalization behind Exxon Mobil, has experienced continued strong demand for its heavy equipment products in the United States and abroad. Its infrastructure unit racked up 12 percent profit growth, while commercial finance had a profit gain of 12 percent and GE Money consumer finance jumped 13 percent.

Revenue rose 12.3 percent to $42.53 billion from $37.84 billion a year ago. Analysts, on average, expected $42.44 billion, according to Reuters Estimates.

Because of the size and diversity of its operations, which range from manufacturing railroad locomotives to consumer lending, investors view GE as a bellwether of the U.S. economy.

CEO Deems Outlook 'Strong'

GE said it expects to report fourth-quarter profit from continuing operations of 67 cents to 69 cents per share. Analysts look for 68 cents.

"Our outlook for the remainder of the year is strong," said Jeff Immelt, GE's chairman and chief executive, in a statement. "We have a better set of financial services businesses and a successful turnaround at NBC Universal, and we will have earnings acceleration in infrastructure."

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The Fairfield, Conn.-based company has put its WMC Mortgage unit, which made home loans to less credit-worthy borrowers, on the block following a meltdown in the subprime mortgage lending market. Regulatory changes in Japan also prompted GE to put its Japanese consumer finance business up for sale.

Eric Boyce, portfolio manager at Hester Capital Management, in Austin, Texas, which holds GE shares, said investors will still keep an eye on the consumer finance business.

"That is obviously something that we want to monitor," he said.

With foreclosures on subprime mortgages up sharply this year and the rates on many variable-rate mortgages due to rise, investors have raised concerns about a possible rise in delinquencies among consumer loans.

After underperforming the major U.S. indexes for much of the past few years, GE shares have started to gain ground. So far this year they are up some 12 percent, roughly in line with the blue-chip Dow Jones industrial average and ahead of the 10 percent rise of the broad Standard & Poor's 500 index.

GE shares were off 1.2 percent in premarket trading at $41.10 from a $41.60 close Thursday on the New York Stock Exchange.

"Investors look at GE as a broadly diversified multinational with a lot of overseas exposure," said Boyce. "You've seen it reflected in the stock price, having finally broken out of that $30s band and into the $40s."

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