By Ted Mann and Chelsey Dulaney
General Electric Co. delivered solid results from its industrial
businesses thanks to strength in the U.S. economy and demand for
jet engines and gas-powered electrical turbines.
Revenue rose 1.5% in the second quarter to $32.75 billion from
the previous year beating Wall Street forecasts. Earnings from its
industrial operations rose 5% helped by a companywide focus on
slashing costs.
GE needs to show that it can run its industrial businesses well
as it sells off the bulk of its banking business that has at times
accounted for around half of GE's earnings. By 2018, Chief
Executive Jeff Immelt expects 90% of the company's profits to come
from selling equipment for airplanes, railroads, oil extraction and
electricity generation.
"The environment remains one of slow growth and volatility,
particularly in growth markets, while the U.S. is gradually
improving," said Mr. Immelt in a news release.
Over all, GE said orders were up 8% for the quarter, boosted by
a 37% increase in its aviation segment and a 29% jump in its
business that sells power turbines.
Shares of GE rose about 1% in midday trading to $27.29.
Scott Davis, an analyst at Barclays who rates GE overweight,
said the strong industrial performance in the second quarter was an
encouraging sign that the company is gaining ground. "GE is
rebuilding credibility and has put up very respectable numbers the
last several quarters," Mr. Davis said in a note to investors
Friday.
GE has two major transactions tangled up in regulatory limbo.
U.S. antitrust enforcers are seeking to block its $3.3 billion sale
of its appliances unit to Electrolux AB, while European regulators
are holding up the $17 billion acquisition of Alstom SA's power
businesses that was announced last year.
GE on Thursday submitted concessions to European regulators, who
have challenged the Alstom acquisition on the grounds that it would
hamper competition for heavy-duty gas turbines on the continent.
Regulators will decide by Sept. 11 whether to let the Alstom deal
go through.
On Friday, Mr. Immelt deflected a question about his "plan B" in
the event the Alstom deal collapses. "I'm just not going to go
there," he said. "We like this deal, it's our intention to close
the deal, and that's really where our stand is."
The company says it expects to close on both the appliance and
Alstom deal this year.
Meanwhile, Mr. Immelt raised his target for selling off
operations in GE Capital, the company's massive banking arm. By
year-end, the company should have signed agreements to sell pieces
valued at between $120 billion and $150 billion, up from $100
billion.
At the same time, GE is coping with serious headwinds due to
slowing growth in emerging markets and the continued pressure from
the low price of oil.
Crude oil's slump slashed profit at GE's oil and gas business by
12% to $583 million and its revenue slipped 15%. At GE's Lufkin
subsidiary, which makes oil production equipment, orders fell 40%
in the quarter, according to Jeff Bornstein, GE's chief financial
officer. Service revenue slumped in all of its units as oil
exploration and production companies have slashed budgets to cope
with falling prices
The company has warned investors that its oil and gas sales and
earnings could fall as much as 10% this year.
While GE saw good growth in the U.S. for its health-care
business, which makes devices like CT scanners and ultrasound
machines, there was trouble in China, where orders fell 9%.
Nonetheless, Mr. Bornstein said, "We do not think there's an
underlying demand problem."
The company reported a loss of $1.36 billion, or 13 cents a
share, compared with a profit of $3.55 billion, or 35 cents a
share, a year earlier.
Write to Ted Mann at ted.mann@wsj.com and Chelsey Dulaney at
Chelsey.Dulaney@wsj.com
Access Investor Kit for General Electric Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US3696041033