General Electric Beats With Revenue Jolt (Update 2)

  • Fourth-quarter operating earnings of $4.7 billion, or 44 cents a share, beating the consensus estimate of 43 cents.
  • Revenue of $39.327 billion beats the consensus estimate of $38.739 billion.
  • GE Capital pays $1.0 billion Q4 dividend to parent company, for a total of $6.4 billion during 2012.
  • 2012 operating earnings total $16.1 billion, increasing 8% from 2011.

Updated with more detail on industrial revenue growth, a strong reaction by investors in premarket trading, and comment from JPMorgan analyst Stephen Tusa.

NEW YORK ( TheStreet) -- General Electric ( GE) on Friday reported 8% organic growth for 2012.

The company reported fourth-quarter operating earnings of $4.666 billion, or 44 cents a share, beating the consensus estimate among analysts polled by Thomson Reuters of a 43-cent profit. Operating earnings rose from 36 cents in the third quarter and 39 cents during the fourth quarter of 2011.

Fourth-quarter revenue totaled $39.327 billion, beating the consensus estimate of $38.739 billion, as the company saw sequential increases in all major segments. Total revenue increased from $36.349 billion the previous quarter and from $37.972 billion a year earlier.

Operating earnings for all of 2012 were $16.1 billion, increasing 8% from $14.9 billion in 2011. Operating EPS for 2012 was $1.52, increasing from $1.31 in 2011.

GE's shares were up 3.5% in premarket trading, to $22.05.

GE CEO Jeff Immelt said the company "ended the year with a strong quarter despite the mixed global economic environment," and that "the outlook for developed markets remains uncertain, but we are seeing growth in China and the resource rich countries. With our largest backlog in history and a substantial amount of cash generated by our businesses in the fourth quarter, we have great momentum going into 2013."

The company's backlog of equipment and services orders was $210 billion as of Dec. 31. GE also said that all of its industrial segments "expanded margins in the quarter, with Industrial segment margins up 120 basis points over the prior-year period. Infrastructure orders for the quarter were $28.5 billion, up 2%, and up 7% excluding the effects of a decrease in orders for wind turbines, and foreign exchange."

Industrial growth was mainly outside the U.S. The company said that "Industrial segment growth market revenues increased 11%, driven by double-digit growth in Russia, Australia/New Zealand, Latin America, China, Sub-Saharan Africa and ASEAN. "

Industrial Segments


For GE's Power & Water segment, fourth-quarter revenue totaled $7.652, increasing from $7.196 billion in the third quarter, and $7.538 billion in the fourth quarter of 2011. Segment profit was $1.747 billion or the fourth quarter, increasing from $1.184 billion the previous quarter, and $1.661 a year earlier.

For Oil & Gas -- which along with Power & Water and Energy Management was separately broken out from Energy Infrastructure in December, revenue during the fourth quarter totaled $4.548 billion, increasing from $3.465 billion in the third quarter, and $4.083 during the fourth quarter of 2011. Profit for the segment was $649 million during the fourth quarter, increasing from $469 million the previous quarter, and $567 a year earlier.

Energy Management fourth-quarter revenue totaled $1.934 billion, increasing from $1.879 billion in the third quarter, but declining slightly from $1.954 billion in the fourth quarter of 2011. Segment profit was $64 million, increasing from $42 million the previous quarter, and $47 million a year earlier.

In the Aviation segment, fourth-quarter revenue was $5.467 billion, increasing from $4.781 billion the previous quarter, but declining from $4.924 billion a year earlier. Fourth-quarter segment profit was $1.039 billion, compared to $924 million in the third quarter, and $850 million in the fourth quarter of 2011.

Healthcare revenue during the fourth quarter totaled $5.183 billion, increasing from $4.307 billion the previous quarter, and $5.163 billion a year earlier. Profit for the segment was $1.021 billion in the fourth quarter, increasing from $620 million billion in the third quarter, and $953 million in the fourth quarter of 2011.

GE Capital

GE Capital's fourth-quarter revenue totaled $11.770 billion, increasing from $11.369 billion the previous quarter and $$11.577 a year earlier. Fourth-quarter profit for the finance segment was $1.808 billion, compared to $1.679 billion in the third quarter, and $1.660 billion in the fourth quarter of 2011.

Following the $1.0 billion payment to the parent company, GE Capital's Tier 1 common equity ratio was 10.2% as of Dec. 31, which was the same ratio as in the previous quarter. GE Capital paid dividends totaling $6.4 billion to the parent company during 2011.

Parent and Stock


The company said it returned $12.4 billion to shareholders during 2012, through dividends and $5.2 billion in share buybacks.

General Electric's shares closed at $21.30 Thursday, up 1.5% year-to-date. The shares returned 21% during 2012, following a 1% return during 2011.

The company on Dec. 14 raised its quarterly dividend by two cents to 19 cents, for a yield of 3.57%, based on Thursday's closing price.

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

Analyst Reaction


JPMorgan analyst Steven Tusa said in a note before the market open that the quality of General Electric's fourth-quarter earnings "was generally solid with revenues +3% vs JPM (+1% vs Consensus), Industrial margins better (+20bps vs JPM), GE Capital in line (with a 6% tax rate higher than expected) and the net of corporate/tax in line with our model."

With Immelt having carefully reduced his guidance for GE's 2012 organic growth in December to 8% from his 10% estimate in September, Tusa said "expectations were as low as they've been for some time," reflected by the relative underperformance of the shares, and that investors were "bracing for sloppy print."

"In that context, there is no debate that the details are better than feared."

Tusa rates General Electric "Overweight," with a $24 price target.

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

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

>Contact by Email.

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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