NEW YORK ( TheStreet) -- General Electric CEO Jeff Immelt said last month that "we feel good about how we are positioned" for 2013, but he was also careful to lower investors' expectations for the fourth quarter.

GE will reports its fourth-quarter results early Friday morning, with a consensus earnings estimate of 43 cents a share, among analysts polled by Thomson Reuters, increasing from earnings of 36 cents in the second quarter, and 39 cents during the fourth quarter of 2011.

Speaking at the company's analyst meeting on Dec. 17, Immelt said that "when I stood here a year ago, we said organic growth between 5% and 10%; in September, we said 10%. I think we see right now, organic growth at 8% with a slightly tougher macro environment in the fourth quarter," according to a transcript provided by Thomson Reuters. Immelt cheerfully pointed out that GE's lower-than-expected growth rate was still "two or three times than most of our peers, pretty strong organic growth performance."

"We are running the industrial businesses and at a lower cost base with trying to create a cost hedge if you will, when we think about next year," Immelt said, adding that "there is still a lot of macro volatility." When discussing the economic and political uncertainty, the CEO said "we are just prepared, we've got low cost, we have invested back in organic growth and we've got a lot of cash so we are prepared, I think, as the Company looks forward into 2013."

GE Capital


During the third quarter, GE Capital paid the parent company $2.4 billion in dividends, after paying $3.0 billion to the parent during the second quarter. Morgan Stanley analyst Nigel Coe on Sunday estimated that the financial unit would pay GE $1.203 billion in dividends for the fourth quarter. The analyst continues to expect GE Capital to become a "cash machine," saying that the unit's "Basel I Tier-1 Common Equity ratio compares favorably to US Bank peers and assuming maintenance of a 10% CT1 ratio, we see potential for $30bn cash distribution though 2015."

A healthy GE Capital is just what investors want to see, as it supports the parent company's return of capital. Coe estimates that General Electric will buy back between $5 billion and $5 billion worth of shares each year through 2015, but sees "further upside."

When discussing the continued right-sizing of GE Capital during the Dec. 17 meeting, Immelt said that the unit's balance sheet "will be probably less than $425 billion of any net investments," with roughly $75 billion in assets continuing to run off. GE Capital had $425 billion in total assets as of Sept. 30.

"We've got a nice set of core assets which are big lending and leasing franchises, mid-market franchises where we think we've got a strong competitive advantage," Immelt said, while hinting of large asset sales down the line. "We've got a set of businesses in what we call value maximizing which are the European banks in retail finance which, we are just going to try to drive shareholder value and make good decisions around those assets as time goes on."

GE on Monday completed its acquisition of Metlife Bank's deposit business, as MetLife ( MET) continued to work toward escape Federal Reserve regulation as a bank holding company. GE Capital picked up roughly $6.4 billion in deposits and an "established online platform" to gather deposits, allowing the company to rely less on wholesale funding.

Total Revenue


The consensus fourth-quarter revenue estimate for General Electric is $38.715 billion, increasing from $36.349 billion in the third quarter, and $37.973 billion, a year earlier.

Coe trails the consensus, estimating third-quarter revenue of $37.948 million, with year-over-year declines in the Power & Water, Transportation and the GE Capital segments (driven by "asset attrition"), partially offset by revenue increases in the Oil & Gas, Energy Management, Aviation, Healthcare and Home & Business Solutions segments.

Barclays analyst Scott Davis on Jan. 10 estimated that GE's fourth-quarter revenue will total $39.026 billion, with revenue growth across all segments, except for GE Capital, for which he expects a 3% decline.

Power & Water


Coe estimates that segment fourth-quarter revenue will decline by 5% year-over-year, to $7.134 billion, with a decline in gas turbine shipments to 31 from 33, a decline of more than 20% in "in Aeroderivative shipments (38) and lower balance of plant revenues. Coe also said that "in Wind, we expect 750 turbine shipments vs. 1,014 in 3Q12 and 688 in 4Q11, driving 10% Y/Y Wind revenue growth."

Davis estimates that fourth-quarter revenue in the Power & Water segment will total $7.538 billion, increasing 1% from a year earlier, saying "demand for energy services is growing, but high utilization rates for US gas turbines are delaying outage cycles," which sets up a "very strong 2013/2014."

Davis continued on the long-term theme for gas, saying "current economics (let alone EPA mandates) support coal to gas switching and GE should begin to see US-based orders for new equipment starting in 2H13." Looking further ahead, "high-margin services and parts appear well positioned for a strong next few years. High utilization rates on decade-old equipment in the US will pull forward shutoff cycles by 6-12 months (of a 5-year cycle). And even older-gen equipment in Japan and Korea is being repaired, upgraded, or replaced proactively."

The icing on the cake for GE, according to Davis, is that new turbine have "longer service agreement terms, and fewer 3rd party parts offerings."

Aviation


For the Aviation segment, Coe estimates that fourth-quarter revenue will come in at $5.047 billion, increasing 2.5% from a year earlier, "driven by easier commercial spares comps."

Davis estimates the unit's fourth-quarter revenue will total $5.170 billion, as "GEnx engine shipments ramp up and spares lap easier comps. We are expecting commercial spares daily order rates to be ~flat y/y and sequentially, vs down 18% in 3Q." Davis also expects "margins to be a strong 19.6% and to continue to inflect from here as Aviation begins to see positive leverage on R&D spend and company moves up the learning curve on GEnx shipments."

Looking ahead, Davis expects the Aviation segment to "show solid revenue growth over the next couple of years and ~50 bps/year of operating margin expansion driven by double digit services/analytics growth, execution on new engine launches, strategic divestitures, increased value gap, and supply chain productivity improvements."

Healthcare

Coe estimates that GE's Healthcare segment will deliver fourth-quarter revenue totaling $5.212 billion, growing 1% from a year earlier, saying "we model 3% organic growth - consistent with last quarter's result, driven by Life Sciences and Ultrasound ."

Davis estimates the segment's fourth quarter revenue will total $5.473 billion, increasing 6% from the fourth quarter of 2011, saying "commentary through the quarter has been encouraging." The analyst said that "margins should also begin to see benefits of restructuring. On balance, there continues to be risk here, but outlook is improving."

Oil & Gas


Coe expects the Oil & Gas segment to see a 7% year-over-year increase in fourth-quarter revenue to $4.369 billion, with growth accelerating from a 4% rate in the third quarter, "as we expect some project deferrals to shift into 4Q sales. This is also consistent with our recent Distributor survey, which showed sequential acceleration in US O&G sales volumes."

Davis estimates that fourth-quarter Oil & Gas revenue will grow by 1% year-over-year to $4.124 billion, saying that "top-line growth and operating margin expansion will likely be driven by continued secular trends such as expanded production capacity, aging pipelines, and growth in unconventionals (LNG) & subsea," and that the segment "should continue to expand internationally with emerging markets a key focus area, investing in research/manufacturing capabilities in such areas as Brazil, Russia, Africa, SE Asia, etc."

Energy

For the company's Energy Management segment, Coe expects to see revenue fourth-quarter revenue of $2.149 billion, saying "we model 10% year-over-year growth vs. 16% growth in 3Q12 driven by backlog conversion.

Davis said that "with 1-2% operating margins, the newly split-out Energy Management segment should be a key area of focus for improvement. GE believes Energy Management should be a 10% margin business; peers are at 10-15%." Davis expects fourth-quarter revenue to total $2.032 billion, increasing 4% from a year earlier.

GE's Stock: Growth and Income


General Electric's shares closed at $21.12 Wednesday, up slightly year-to-date. The shares returned 21% during 2012, following a 1% return during 2011.
General Electric on Dec. 14 raised its quarterly dividend by two cents to 19 cents, for an attractive yield of 3.60%. The company also increased its share repurchase authorization by $10 billion and extended its buyback plan through 2013. Under the company's previous buyback plan, the company was authorized to repurchase up to $4.9 billion worth of shares as of Sept. 30.

The shares trade for 12.7 times the consensus 2013 EPS estimate of $1.67. The consensus 2014 EPS estimate is $1.84.

Coe rates GE "Equal Weight," with a $23 price target, estimating the company will post fourth-quarter earnings of 43 cents a share, with a 2013 EPS estimate of $1.65, increasing to $1.72 in 2014.

Davis rates GE "Overweight," with a $25 price target, saying that a "sector-high dividend yield and a bullish view on US gas powergen keeps us in favor of an Overweight rating on the stock," adding that "potential catalysts include powergen orders picking up, further share repos, corporate dividend announcements, and potential portfolio actions."

Davis estimates the company will report fourth-quarter EPS of 44 cents. His 2013 EPS estimate for GE is $1.70, climbing to $1.90 in 2014.

Interested in more on General Electric? See TheStreet Ratings' report card for this stock.

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

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.
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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