GE profit rises on industrial business

Sales in oil and gas division, firm’s fastest-growing unit, climb 27 per cent in quarter

NEW YORK— General Electric posted first-quarter earnings that beat analysts’ estimates, buoyed by expanding margins in the industrial businesses that make products such as jet engines.

Adjusted profit from continuing operations was 33 cents a share, topping the 32-cent average of 11 estimates compiled by Bloomberg. Earnings on that basis fell 18 per cent from a year earlier to $3.3 billion (U.S.), the Fairfield, Conn.-based company said Thursday.

Wider industrial margins are important because chief executive officer Jeffrey Immelt is working to build up the manufacturing units while shrinking GE Capital, whose North American consumer-lending business will have an initial public offering this year. Profit margins in the industrial segment improved by 50 basis points from a year earlier, GE said.

“If you dig into the industrial businesses, the bigger businesses were the ones that did really well,” said Christian Mayes, an Edwards Jones & Co. analyst in Des Peres, Mo. “Oil and gas and aviation have been strong for a while now. Especially on the aviation side, you’re starting to see orders for spare parts increase again, with the airlines feeling like they can restock their shelves.”

While GE doesn’t give profit forecasts, it did reaffirm the so-called earnings framework given to analysts to devise their own estimates. Profit excluding some costs and gains will be $1.70 a share for the full year, based on the average of 15 estimates compiled by Bloomberg.

Quarterly revenue fell 2 per cent to $34.2 billion, trailing the average estimate of $34.4 billion. Industrial sales rose 8 per cent with organic growth of 8 per cent, GE said.

Infrastructure orders were unchanged at $23.7 billion, while the order backlog grew to $245 billion on increases in every business line, GE said.

Sales in the oil and gas division, GE’s fastest-growing business, climbed 27 per cent to $4.3 billion. The aviation unit posted a 14-per-cent gain to $5.78 billion. GE Capital’s revenue was down 8 per cent to $10.5 billion.

Immelt has said he wants industrial units eventually to account for 70 per cent of GE’s earnings, up from 53 per cent last year.