GE Profit Up, Optimistic on Economy

NEW YORK – General Electric Co. (GE) Friday reported a small rise in quarterly profit as strength in industrial orders and its health-care business offset deal-related costs and weakness in energy operations.

GE, considered an economic barometer because its diverse businesses range from jet engines to entertainment assets, also voiced optimism about the economy and stood by its growth forecasts.

"This is the best economy we've seen in years," GE Chairman and Chief Executive Jeff Immelt (search) said in a statement. "Orders continue to be strong, growing at 13 percent, with services orders up 29 percent."

The conglomerate, whose businesses also include financial services, appliances and medical devices, posted net earnings of $3.92 billion, or 38 cents a share, for the second quarter. That compared with $3.79 billion, or 38 cents a share, a year earlier.

Shares of GE, which had forecast earnings of 37 cents a share, rose 1.5 percent on the New York Stock Exchange (search), buoying the Dow Jones industrial average, which gained 51 points.

GE said revenue rose 11 percent to $37 billion, beating analysts' expectations of $35.59 billion as compiled by Reuters Estimates. The recent acquisitions of British medical device maker Amersham and 80 percent of Vivendi Universal (search), owner of Universal Studios, theme parks, and cable networks, boosted revenue.

Robert Schenosky, an analyst at Jefferies & Co. who has an "equalweight" or "hold" rating on GE, said the increase in earnings reflected a favorable tax rate.

"One positive highlight to take away was an excellent showing in the quarter by the health-care business," Schenosky said."

But overall, he said, "the positive and negative balance out."

GE, the world's largest corporation by market capitalization, raised the low end of its earnings guidance for the full year 2004 by a penny, forecasting $1.55 to $1.60 a share after the impact of various deals. Previously, it had forecast $1.54 to $1.60 a share.

In a conference call, GE Chief Financial Officer Keith Shrerin said the company stood by its earnings forecast of 37 cents to 40 cents per share for the third quarter.

Analysts' average forecasts are 39 cents a share for the third quarter and $1.57 per share for the year, before special items, according to Reuters Estimates.

GE earned 40 cents a share in the 2003 third quarter and $1.55 a share for the full year 2003.

The company said it was confident of delivering 10 percent to 15 percent growth in earnings per share in 2005.

Second-quarter results were impacted by several deals, including the divestiture of GE's Genworth insurance business.

GE has been transforming its portfolio of businesses. During the quarter, it closed its initial public offering of Genworth, as well as the Amersham and Vivendi Universal acquisitions.

"We are very confident about our future," Immelt said.

GE's energy business, however, continued to see declines, with profit down 40 percent in the second quarter.