General Electric posted a 12 per cent rise in overall industrial profits, as strength in its businesses selling gas turbines, jet engines and oil industry equipment offset weakness in healthcare and transportation.
GE, which is increasingly focusing on its traditional manufacturing businesses over its finance unit, posted an 8 per cent increase in industrial revenue, even as overall company revenue fell slightly short of Wall Street’s target.
GE shares rose 2.4 per cent to $26.74 in afternoon trading yesterday as profit also edged past analyst estimates.
“The big story is the organic revenue growth,” said Tim Ghriskey, chief investment officer of Solaris Asset Management, which owns GE shares. “It really shows the return to an industrial emphasis is paying off, and where the company is focusing.”
The results underscored GE chief executive Jeff Immelt’s strategy to focus the company even more on manufacturing of large industrial products as he reduces the company’s dependence on its GE Capital finance unit.
Mr Immelt is also seeking to improve profit margins and slash administrative costs at the 307,000-employee company. Still, GE said it plans to divest $4 billion worth of industrial businesses this year as the conglomerate focuses its portfolio on high-returning businesses.
The company is already in the process of spinning off its North American retail
finance business as it seeks to reduce the contribution from GE Capital to 30 per cent of company profits by 2016, compared to about 45 per cent in 2013. “We are more active on the divestiture front this year,” Mr Immelt told analysts on a conference call. GE also is targeting acquisitions in the $1 billion to $4 billion range, although it would consider spending more if the deal was “absolute strike zone,” chief financial officer Jeff Bornstein said in an interview, including targets that fit with its main businesses and offer significant cost savings.
Many conglomerates want to step up dealmaking but also must grapple with targets being expensive due to the rising stock market, a perspective that Bornstein echoed. “Valuations are quite high and we will be very selective in what we do,” Bornstein said.
Rival US diversified manufacturer Honeywell International Inc also posted slightly better-than-expected profit yesterday, helped by sales of its car turbochargers in the United States and China.
Reuters
