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GE profit beats estimates amid demand for heavy equipment

January 21, 2011|Reuters

General Electric Co. posted a better-than-expected profit, helped by strong emerging-market demand for heavy equipment and setting the stage for what could be a wave of strong manufacturing earnings reports.

Shares of the world's largest maker of jet engines and electric turbines rose 7.1% Friday, hitting their highest level since November 2008 and making GE the biggest lift to the blue-chip Dow Jones industrial average.

A rebound in demand for railroad locomotives and a rise in sales of medical imaging devices helped GE notch a 12% rise in orders in the fourth quarter, driving its order backlog — a key indicator of future revenue — to $175 billion.

"The environment continues to improve," Chief Executive Jeffrey Immelt told analysts during a conference call. "The economy can get a little bit stronger every day."

The results may raise expectations for a wave of earnings reports coming next week from fellow blue-chip industrials Caterpillar Inc., United Technologies Corp., Boeing Co. and 3M Co.

GE's fourth-quarter net income rose to $4.5 billion, or 42 cents a share, from $3 billion, or 28 cents, a year earlier.

Profit from continuing operations came to 36 cents a share, above the 32 cents analysts had expected, according to Thomson Reuters I/B/E/S.

Revenue rose 1% to $41.38 billion, above the $39.9 billion analysts had expected.

Deutsche Bank analyst Nigel Coe called the results "arguably their best quarter since 2007."

Fairfield, Conn.-based GE recorded 10 cents a share in one-time charges, including $500 million set aside to cover the cost of cleaning up chemicals it had dumped into New York's Hudson River more than three decades ago. That charge was offset by 10 cents a share of one-time gains, including a tax settlement.

After a few years where profits declined at GE and trouble at its finance arm had management on the defensive — pushing the shares as low as $5.87 in March 2009 — Immelt is back on the offensive, twice raising the dividend in the past year, resuming share buybacks and returning to the takeover trail.

GE shares closed up $1.31 at $19.74, adding almost $14 billion to the firm's market capitalization, which reached $210.32 billion.

GE shares have risen almost 11% over the last year, roughly in line with the Dow.

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