The Rising Influence of Rising Affluence

[DewDiligence]

GE’s Earnings Rise 21%

[GE is such a hodgepodge of businesses that I don’t consider it an especially good play on The Global Demographic Tailwind; still, some of GE’s operating divisions, such as healthcare and energy infrastructure, do have a strong TGDT tie-in, and hence the stock deserves a mention on this board from time to time. Comments?]

http://online.wsj.com/article/SB10001424053111903554904576461630340236222.html

›JULY 22, 2011, 11:52 A.M. ET
By BOB SECHLER

General Electric Co. on Friday reported a 21% rise in second-quarter profit alongside an upbeat outlook for the rest of the year as a host of other U.S. industrial groups raised their own earnings' outlooks.

GE's performance was led by accelerating sales of big-ticket industrial products in key overseas markets such as India and China, with its finance arm continuing to deliver improved results as impairments decline and the first signs of recovery emerge in the commercial real-estate market.

GE's results topped Wall Street expectations and were accompanied by other bellwethers such as Caterpillar Inc. and Honeywell Inc. boosting their profit projections. GE doesn't give earnings' guidance but said the outlook for industrial revenue growth unchanged at flat to up 5%.

Jeff Immelt, GE's chairman and chief executive, said on a call with analysts that he was optimistic about the second half of the year, and noted that "leading indicators are improving".

The company said its infrastructure orders were up 24% overall in the second quarter, compared to the year-ago period, with its order backlog—a harbinger of future revenue—climbing to a record $189 billion, from $177 billion in the first quarter.

GE reported a profit of $3.76 billion, or 35 cents a share, for the second quarter, up from $3.11 billion, or 28 cents a share, a year earlier. Operating earnings rose to 34 cents from 29 cents a share.

Revenue slipped 3.5% to $35.63 billion, but GE noted that the figure was up 7% excluding the impact of the sale of its majority stake in the NBC Universal media business earlier this year.

Organic revenue growth in GE's industrial businesses, which it has been counting on to drive results as it downsizes its GE Capital financial arm, was up only 3% in the second quarter, a slowdown from a 5% first-quarter growth rate. The second-quarter figure was within GE's forecast for organic industrial revenue to be flat to up 5% this year. Organic revenue growth excludes the impact of acquisitions, divestitures and currency moves.

The overall results surpassed Wall Street expectations for both profit and revenue. Analysts polled by Thomson Reuters most recently forecast a per-share profit of 32 cents on $34.7 billion.

GE has seen its core earnings improve in recent quarters, helped in part by strong emerging market infrastructure demand and restructuring efforts.

The company's largest segment by revenue, GE Capital, saw its top line decline 1.3% in the second quarter but profit more than double.

Meanwhile, GE's big energy infrastructure division continued to show signs of weakness, with revenue up 9% but profit slipping 19%. GE reiterated that it had expected the trend, primarily because of pressure in the renewable-energy sector as well as its integration of recent acquisitions.

"Indicators are pointing to a stronger second half in 2011 for energy when we expect approximately 17% unit volume growth versus 2010," Mr. Immelt said.‹