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Dow 30 Earnings: General Electric – First Quarter 2011
Diversified manufacturing and financing giant General Electric (GE – Free GE Stock Report) has reported first-quarter share earnings and raised its quarterly dividend. Share net for the period of $0.31 exceeded our estimate by a penny and was up $0.10 on a year-over-year basis. Note that March-quarter results reflect the late-January transfer of NBC Universal to an equity holding. Results included a $0.04-a-share gain from the transaction. Also, GE has adopted a new reporting structure, separating its technology businesses into Aviation, Healthcare, and Transportation. Plus, in July, GE will distribute $0.15 a share, up from $0.14 in April, the third dividend hike within the course of a year.
The most notable contributor to the bottom-line advance was the finance unit, GE Capital. Segment income more than tripled versus the prior year figure, to $1.84 billion. Consumer and retail finance profits increased nicely in the quarter. Further, although the commercial real estate arm continues to operate in the red, losses appear to have peaked in tandem with stabilizing rental prices and rising occupancies.
Meantime, as we anticipated, profits from the Energy Infrastructure unit (29% of the total) slipped somewhat. A volume increase of 17% was insufficient to mitigate the impact of price erosion and higher spending. Indeed, orders were received for 27 gas turbines, versus 10 in the comparable 2010 period. However, wind turbine orders fell 22% and pricing declined 3% on those items. Recent acquisitions, including Dresser and Wellstream, had modest positive effects.
GE's Aviation profits advanced 5%, thanks to a strong increase in commercial engine orders, partially offset by lower demand for military engines, due to reduced funding for the Joint Strike Fighter. Healthcare related earnings rose 7%, with equipment orders out of emerging geographical markets underpinning this gain. In Healthcare, though, revenue strength was partially alleviated by soft pricing. Rounding out the former technology division components, GE's Transportation income increased a considerable 37%, behind rising mining and off-highway vehicle unit volumes, as well as greater service revenues. Locomotive sales were roughly flat, partly due to a difficult prior-year comparison. Transportation margins expanded significantly.
We are maintaining our 2011 share-net forecast of $1.35. This outlook is founded on an ongoing earnings upturn at GE Capital and some turnaround in Energy profitability. Be aware, though, that a ramping up of Aviation R&D costs during the balance of the year will likely crimp results a bit. Our dividend estimate for 2011 also will remain intact at $0.62 a share.
About The Company: Founded in 1892, General Electric Company has grown into one of the largest and most diversified industrial companies in the world. Its variety of segments include Energy Infrastructure (28% of ’10 revenues); Technology Infrastructure (29%); Home & Business Solutions (7%); and Capital Finance (36%). On a geographic scale, more than half of General Electric’s revenues came from overseas last year.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.