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 Strength from sales of oil pumps and jet engines helped the U.S.
conglomerate match Wall Street expectations for fourth-quarter
profit of 53 cents per share, excluding items.
But shares dipped 2.6 percent as it came up slightly short of its
2013 goal for expanding profit margins at its industrials
businesses, which the company is increasingly focusing on as it
reduces its exposure to the volatile financial sector.
"This was an important target they had been putting in front of
investors for a long time," said Christian Mayes, an analyst at
Edward Jones, who has a "hold" rating on GE.
"The transition is continuing to take time and GE is going to really
have to hit these targets, and it's disappointing they couldn't
quite get it done on the industrial target this year."
GE expanded its operating margin for its industrials businesses by
0.66 of a percentage point, below its full-year target of a 0.7
percentage point improvement.
GE's Chief Financial Officer Jeff Bornstein told Reuters in an
interview the margin shortfall was "absolutely negligible, given the
size of the company."
"Execution-wise, we like the momentum we have behind us and but for
a couple of issues in the quarter, it really wouldn't have been much
of a discussion," Bornstein said.
The diversified manufacturer said its quarterly net earnings rose to
$4.2 billion, or 41 cents per share, from $4.01 billion, or 38 cents
a share, a year earlier.
Its 53 cents per share quarterly profit, excluding items, was in
line with the average expectation of analysts, according to Thomson
Reuters I/B/E/S.
"They make a lot of big stuff, and when you sell a lot of big things
it's easier for things to slip on a quarter-by-quarter basis and
have a dramatic effect on margins," said Jack Degan, chief
investment officer at Harbor Advisory Corp.
"On a year-over-year basis, their margins are moving in the right
direction," said Degan, whose company owns GE shares.
The conglomerate said its cost cuts were ahead of plan for 2013, and
it would seek to reduce costs by at least another $1 billion in
2014.
"Cost cuts are how they really made the quarter here," said Tim
Ghriskey, chief investment officer of Solaris Asset Management,
which owns GE shares. "But at some point, cost cuts are going to run
out."
GE shares fell 2.6 percent in afternoon trading to $26.48, against a
broadly flat market. The stock outperformed in 2013 when it rallied
more than 30 percent.
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OIL BOOST
GE, a bellwether for the economy because of its size and diversity,
reported that six of its seven industrial segments grew earnings.
"We saw good conditions in growth markets, strength in the U.S., and
a mixed environment in Europe," Chief Executive Officer Jeff Immelt
said in a statement.
Revenue rose 3.1 percent to $40.38 billion, about $160 million ahead
of analysts' targets.
Revenue at its oil and gas business — its fourth largest, but
fastest growing segment in 2013 — jumped 17 percent, while revenue
in aviation, its second-biggest segment, increased 13 percent.
Ghriskey said the revenue growth was "reflecting very much a GDP
type of growth rate, and nothing above that."
Results in its largest segment, power and water, were hurt by an
issue with the manufacture of blades for wind turbines.
The company did not ship 200 turbines as expected in the fourth
quarter, and now expects to do so in early 2014.
The supply chain issue weighed on profits and margins in the fourth
quarter.
"Wind has been one of the laggards for the portfolio for the last
couple of years," Morningstar analyst Daniel Holland said.
Profit in its smaller energy management unit fell 28 percent,
although the segment is a relatively small contributor to overall
earnings.
GE's backlog of orders for everything from oil pumps to jet engines
and turbines rose 16 percent to $244 billion, a record.
CFO Bornstein said the backlog gave the company confidence it would
reach its goal of increasing revenue in 2014 by 4 percent to 7
percent for its industrial businesses, excluding acquisitions.
(Reporting by Lewis Krauskopf and Ernest
Scheyder; editing by Sophie Hares)
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