The only remaining member of the original Dow Jones Industrial Average, General Electric (GE Free General Electric Stock Report), which is the world's largest and most diversified industrial conglomerate, posted June-quarter results that were basically a mixed bag. Earnings hit both our target and the Wall Street consensus, but revenues were a touch light versus expectations. Still, management provided a positive outlook for the second half of 2013 and highlighted the fact that U.S. growth seems to be perking up. The investment community liked what it heard, and the shares rose nicely in mid-morning trading, setting a 52-week high in the process.

Adjusted to reflect earnings from continuing operations, GE earned $0.36 a share, directly in line with what we had expected and a penny better than the consensus. Yes, this figure is two cents less than the same period of 2013, but recall that the company is in a transition period where it is getting back to its industrial roots and paring the portfolio of assets involved in outlying industries like media and finance.

The top line came in at $35.12 billion, which was subpar versus our $36.25 expectation, but revenues have not been the focus of the market, barring substantial setbacks, due to the flux in holdings. Sales slipped at the company's power and water division, which sells and services gas-fired turbines and water treatment equipment. Still, profitability was maintained after dipping in the first quarter. Elsewhere, infrastructure orders rose 4%, sparking a profit margin jump for industrial segments that equated to 0.5%. GE Capital stumbled in the term, and earnings from this segment fell 9% on a 3% revenue dip. However, it is hard to fault a unit that is in the process of being unwound. This arm has been the weak link in the portfolio since it pulled the company into financial turmoil at the time of the last recession. Its hefty dividends to the parent company have been smiled upon, but its future is up in the air, and management has been forthright about that. In fact, a recent report implied that management is mulling an initial public offering of certain parts of GE Capital to quicken its removal from the ledger.

Even with the slight sales shortfall, investors seem enthused by the comments made on the earnings release by CEO Jeff Immelt. Mr. Immelt highlighted that the U.S. showed strong growth, emerging market operations continued to power ahead, and business in Europe was stabilizing. Not only were these welcome words, they are a stark contrast to information provided by the company in recent quarters, when serious concerns over the health of domestic divisions was expressed.

The CEO also painted a brightening picture for the second half of 2013, and we are on board with that view. What the company has dubbed its cost-out plan calls for a $1 billion trimming of industrial expenditures by the end of 2013. The first quarter saw $200 million in cuts, and though no exact figure has surfaced yet for the June interim, we expect a similar amount. That means the savings should hasten in the final two quarters. Moreover, the backlog continues to swell to historic levels. This metric rose $7 billion in the three-month period ended June, to $233 billion. Too, $26 billion in jet engine orders were disclosed at last month's Paris Air Show. The backlog should also get a shot in the arm from the recent buyout of oilfield pump maker Lufkin, which broadens its suite of offerings in the oil and gas field.

Getting back to our own outlook, we are reducing our revenue call slightly to reflect the second-quarter miss. We now anticipate sales of $148.5 billion, down from $149.6 billion. With regards to earnings, our $1.65-a-share call remains static. That figure represents a 9% year-over-year advance.

From an investment standpoint, we are big supporters of GE shares at their current price levels. The company has a new focus and is charging ahead on the industrial scene to meet and surpass these goals. We think this blue chip makes a strong cornerstone to any portfolio. Its appreciation potential 3 to 5 years hence is greater than the Value Line median, and its dividend yield bests the average of all the stocks in our coverage. Patient investors should be rewarded handsomely.

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 (30% of ’12 revenues); Aviation (13%); Healthcare (12%); Transportation (3%); Home & Business Solutions (6%); and Capital Finance (31%). On a geographic scale, more than half of General Electric’s revenues came from overseas in 2012.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.