General Electric (GEFree General Electric Stock Report), the largest industrial diversified conglomerate in the world, has reported results for its December quarter and full-year 2013. The numbers came in right on target for both the top and bottom lines. Still, the market's initial response was unfavorable, as some view the company's earnings as being propped up by cost trimming. The cuts are so sizable that skeptics view them as unsustainable. With that, these shares have traded down modestly.

Looking at revenues, this metric came in at $40.4 billion for the three-month period ended December 31st, up from the $39.2 billion posted in the same timeframe in the prior year. It compares well to both our and Wall Street's call of $40.2 billion, and brings the annual revenue amount for 2013 to $146 billion. That number is a hair (less than 1%) below 2012's amount, but subscribers will note that this showing is skewed due to the fact that GE is unwinding its financial arm, GE Capital. Too, NBC Universal is gone from the portfolio, and a spinoff of its sizable consumer credit card business is in the works for this year.

Share net came in at $0.53 after stripping away nonrecurring charges and discontinued operations, bringing the annual bottom-line sum to $1.64. That tally was within the provided guidance range and one penny short of our in-house expectations. The cost structure is the primary reason for the earnings advance. Roughly $1.6 billion was removed from this side of the ledger and management has put a plan in place to reduce this amount by an additional $1 billion in 2014. Bears are jumping all over this announcement, but we think many are failing to look at the big picture; General Electric is in the middle of a transformation that will bring it from a sprawling conglomerate to a much more focused industrial entity that builds and services complex equipment. With that in mind, one can more easily see how such a reduced cost layout may well be attainable.

Getting under the hood a little bit, we see that six of the seven industrial divisions of the company displayed earnings growth during the fourth quarter. Yes, the largest area, power generation, has some concerns, but this unit has been strong in the past and should flourish with the improving global economy so we are not overly concerned, at this juncture. The oil and gas business, the industrial's fourth largest, but fastest growing, segment displayed the highest demand for its goods and services, with aviation, the second-biggest division, not far behind. Overall, the operating margin, as a whole on the industrial side of the coin, improved 0.66 of a percentage point, or a whisker shy of management's stated goal of 0.70.

As stated, GE is getting away from the volatility of the financial arena and getting back to its industrial/manufacturing roots. Problems at GE Capital hurt the parent company badly during the financial crisis, and we think investors would be wise to be more enthusiastic about this change in philosophy. The success of the move is apparent, and one need look no further than the company's soaring backlog to see that things are heading in the right direction. As of the close of 2013, GE's backlog swelled 16%, to $244 billion. This sum includes orders for everything from locomotives to jet engines to gas turbines. Moreover, top brass seems happy with the way the markets are shaking out. CEO Jeff Immelt stated that ''we saw good conditions in growth markets, strength in the United States, and a mixed environment in Europe''. Europe is coming off its lows, so improved contributions from operations across the pond will be welcome this year.

Of note to shareholders, finances remain excellent and GE was able to stick to its capital allocation plan for the year just ended. Indeed, it finished 2013 with $89 billion in cash and equivalents and celebrated that feat by upping to quarterly dividend 16%, to $0.22 a share. And this was after $10 billion worth of share repurchases during the campaign.

With regard to 2014, our top- and bottom-line calls remain unchanged. We look for revenues of $149.8 billion to translate to earnings of $1.75 a share. These two amounts equate to 3% and 7% annual growth, respectively. That is nothing to shake a stick at for a company of this size. Acquisitions will undoubtedly be focused on the industrial front, and GE Capital will continue to be unwound, highlighted by the forthcoming spinoff of the credit card unit, which we believe will be a potential spark to ignite a share-price rally later on this year.

Starting a portfolio with GE stock as its cornerstone seems like a winning proposition. The company is the only remaining member of the original Dow 30 that is still in the index today. Its name recognition and stature on Wall Street is secure. More important, it pays out a well-secured and handsome dividend that is currently yielding about 3.3%, significantly higher than the Value Line median. Too, turnaround efforts are going smoothly so the possibility that these shares will trend upward over the coming 3 to 5 years is strong.

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.