General Electric Beats Second Quarter Expectations

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Last Update: 22-Jul-11 12:01 ET

General Electric (GE $19.10 -0.06) reported second quarter earnings of $0.34 per share, $0.02 better than the Capital IQ Consensus Estimate of $0.32.

Revenues fell 3.5% year/year to $35.63 billion versus the $34.7 billion consensus. primarily driven by the absence of NBCU revenues after the sale of GE's majority position to Comcast. Excluding this impact, revs were up 7%.

GE Capital Services' (GECS) revs decreased 1% from last year to $12.4 bln. Industrial sales of $23.0 bln decreased 6% year/year. Segment profit increased 18% year/year, as increases of more than 100% at GE Capital, more than 500% at Transportation, 9% at Aviation and 8% at Healthcare more than offset earnings decreases of 19% at Energy Infrastructure and 26% at Home & Business Solutions. GE's backlog grew to a record high of $189 bln.

Total infrastructure orders were up 24%, reflecting robust strength in equipment orders, up 33%, and service orders up 16%. "International revenues from Industrial (ex NBCU) were $13.4 bln, up 23% representing 59% of total Industrial revenues. GE revenue for the Industrial segments accelerated in growth regions, including double-digit increases in India, China, Southeast Asia, Africa, Russia, Australia, Canada, and Latin America. GE Capital's portfolio transformation is ahead of schedule. Consumer and Commercial Lending and Leasing led with earnings growth of 57% and more than 100%, respectively. We continue to see strong demand for credit with CLL new volume originations at $10.8 bln for the quarter, up 33% from prior year... As previously communicated, Energy earnings and margins were down primarily as a result of pressure in the renewable sector. In addition, margins were impacted by the integration of Energy acquisitions.

Indicators are pointing to a stronger second half in 2011 for Energy when we expect ~17% unit volume growth year/year. Integration of strategic Energy acquisitions is ahead of plan, further positioning Energy Infrastructure for growth in the second half of this year.

Overall, Industrial earnings should improve in 2H11 and the cycle is expected to accelerate in 2012." Cash generated from Industrial operating activities totaled $4.4 bln in the first half of 2011, on track for full-year plan of $12-13 bln. At quarter-end, GE had $91 bln of consolidated cash. Year-to-date, the co has executed on $1 bln of stock buybacks and $2.7 billion of stock buybacks since restarting the program in 3Q10. The co plans to retire the preferred stock issued to Berkshire Hathaway (BRK.B) in October 2011.