BOSTON – General Electric Co. (GE) on Friday posted a 24 percent rise in quarterly profit on a return to profit growth at its energy business and steady growth at its financial units.
The earnings improvement, which was in line with Wall Street estimates, came from nearly every corner of the media, financial and industrial giant's business portfolio, with all 11 operating segments posting a profit gain of more than 10 percent.
"People were expecting the core businesses — health care, financial and media — to do very well and now you're starting to see a pick-up in its mid- to late-cycle businesses like power and transportation," said Steve Roukis, director of research at Matrix Asset Advisors, which owns more than 1 million GE shares.
GE Chief Executive Jeff Immelt (search) said in a statement that the company has put in place initiatives to ensure it can sustain earnings growth of more than 10 percent in 2005 and beyond.
Net income rose to $4.65 billion, or 44 cents a share, in the second quarter, from $3.75 billion, or 36 cents a share, a year earlier.
Quarterly sales rose 13 percent to $41.56 billion from $36.78 billion last year. Orders increased 13 percent.
Analysts had expected GE, based in Fairfield, Connecticut, to earn 44 cents a share before extraordinary items on revenue of $41.85 billion, according to Reuters Estimates.
For the full year, GE lifted the low end of its earnings per share outlook by 2 cents, but its third-quarter outlook fell slightly below Wall Street estimates.
The energy business, GE's largest industrial unit, posted a profit increase in the second quarter after 10 straight quarters of decline starting in 2002 after the market began to reel from a downturn in the wholesale electricity market.
Under the guidance of newly appointed Vice Chairman John Rice, the energy business has diversified its revenue stream with an emphasis on services while reducing its dependence on cyclical turbine orders.
GE Energy's second-quarter earnings rose 10 percent to $698 million on sales of $4.54 billion.
Shares of GE, however, were down 28 cents at $35.35, from Thursday's New York Stock Exchange close of $35.63.
For the full year, GE lifted the low end of its earnings per share forecast range by 2 cents to $1.80. It kept the high end unchanged at $1.83. Analysts are forecasting $1.82 a share for 2005, according to Reuters Estimates.
For the third quarter, GE forecast EPS in a range of 43 cents to 44 cents on revenue of $41 billion to $42 billion, versus analysts estimates of 45 cents per share on sales of $41.8 billion, according to Reuters Estimates.
GE's commercial and consumer finance businesses continued to be an earnings driver, with a profit gain of more than 20 percent in the second quarter.
Insurance profits rose to $284 million from $53 million, helped by the absence of last year's loss related to the initial public offering of insurance unit Genworth Financial Inc. (GNW).
Earnings at NBC Universal rose 27 percent to $979 million, helped in part by a full quarter of earnings from film company Vivendi Universal Entertainment (search), bought in May 2004.
GE Healthcare put to rest some concerns about margins with an improvement in profitability, while sales grew 12 percent.
The company reshuffled its 11 business units into 6 operating segments earlier this month, but it reported its second-quarter earnings using its previous organizational structure.