GE Order Volume Key for Earnings

NEW YORK ( TheStreet) -- General Electric ( GE) reported fourth-quarter earnings from continued operations of $4.2 billion, or 36 cents a share, topping the estimate of 32 cents a share by analysts polled by Thomson Reuters and increasing 33% on a per-share basis from a year earlier.

Total revenue for the third quarter was $41.4 billion, beating the consensus estimate of $39.9 billion, and coming in 1% higher than in the fourth quarter of 2009.

For all of 2010, earnings from continuing operations totaled $13.2 billion, or $1.15 a share, increasing 15% from 2009. Total revenue for 2010 was $150.2 billion, declining 3% from $155.3 billion in 2009.

The largest percentage increase in year-over-year revenue was in the NBC Universal division, which brought in $4.8 billion in fourth-quarter revenue - an increase of 12% from the fourth quarter of 2009 - and recorded a segment profit of $830 million. This week the Federal Communications Commission and the Justice Department approved the joint venture under which GE will sell a 51% stake in NBC Universal to Comcast ( CMCSA). The deal is scheduled to close next Friday and the company has previous said it expects to net $6.4 billion in cash on the sale.

Charlie Smith -- principal and CIO at Fort Pitt Capital Group in Pittsburgh - whose firm manages investor positions in GE, said the improvement in NBC Universal showed that "Comcast got a better deal than anybody expected."

The Technology Infrastructure segment's fourth-quarter revenue was up 9% year-over-year to $10.9 billion in the fourth quarter, with a profit of $1.9 billion, which was up 11%. Within this segment, Transportation revenue was up 66% year-over-year to $1 billion, with a $73 million profit, compared to a loss of $157 million a year earlier.

The Energy Infrastructure segment's fourth-quarter revenue declined 3% year-over-year to $10 billion in the fourth quarter, with a segment profit of $2.2 billion, down 2%.

While GE Capital's revenue declined 4% to $11.9 billion, the segment's profit increased ten-fold to $1.1 billion, as credit costs continued to decline. The fourth-quarter provision for losses on financing receivables was $1.4 billion, declining from $2.8 billion a year earlier. CEO Jeff Immelt said that there had been "100 million in unexpected recoveries" on credits the company had previously fully reserved. These recoveries directly improved the bottom line.

Technology infrastructure profit was $1.47 billion for the third quarter, declining 10% year over year, with a decline in aviation profits reflecting a gain that was recorded in the third quarter of 2009. Declines in aviation and transportation profit were partially offset by a 14% increase in health care profits.

The company reported $79 billion in cash and equivalents as of December 31.

GE said that during the fourth quarter it booked "more than $5.8 billion in commercial aviation service and equipment orders and over $3 billion in long-term service contracts with several air carriers." The company also booked "more than $750 million in contracts from India's Reliance Power" and signed agreements "worth $700 million for power-generation equipment and services for the new high-efficiency Riyadh PP11 power plant in Saudi Arabia; and a $500 million contract with Saudi Aramco to supply a broad range of equipment and services for an expansion of the Shaybah gas-oil processing facilities."

The company also acquired molecular diagnostics provider Clarient Healthcare for $580 million, pipeline producer Wellstream Holdings for $1.3 billion and Dresser - an energy infrastructure provider -- for $3 billion, during the fourth quarter.

GE reported "infrastructure orders of $24.8 billion up 12% from year ago; equipment up 20%; services up 5%" in the fourth quarter and said that its order backlog had increased to a record $175 billion.

Jeff Immelt said during the company's conference call that GE had "a good outlook for 2011" with total operating earnings "up nicely." In 2012, "fewer headwinds," and "more tailwinds," with a reduced order backlog, along with "earnings growth in Aviation, Energy Infrastructure, and the retiring of preferred stock."

Immelt emphasized the "strong orders momentum" and improved performance in GE Capital, adding that "we are running the place with intensity," and that he was encouraged by "improvement in the broader economy."

Immelt said that GE capital's credit loss reserves were too high, and added that he "would expect write-offs to exceed our provisions by several hundred million dollars during the year." This "reserve release" will boost GE's bottom line, similar to the way many of the largest banks are reducing their reserves, including Citigroup ( C), which reported a net release of allowance for loan losses and unfunded lending commitments was $2.3 billion; Wells Fargo ( WFC), which released $850 million from reserves; JPMorgan Chase ( JPM), which saw a $1.9 billion decline in loan loss reserves; and Bank of America ( BAC), which reported a $1.7 billion decline in reserves during the fourth quarter.

Charlie Smith said "GE only took $200 in credit reserves back into earnings,"which is almost nothing" compared to the large banks, and showed the company wasn't "being real aggressive in the bookkeeping at all." Smith also said that the possibility of GE Capital kicking dividends up to the parent company early in 2012, is "now on the table."

About his new role in Washington as the head of President Obama's economic advisory board, Immelt said "my commitment to GE doesn't change," adding that he would continue to be "focused on the company," and that in his new role his "focus will be competitiveness, exports, global tax policy and manufacturing jobs."

-- Written by Philip van Doorn in Jupiter, Fla.

>To contact the writer of this article, click here: Philip van Doorn.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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