GE Posts Highest Earnings Ever, Boosted by Capital Unit, NBC
March 30, 2011
General Electric Co., reporting its highest quarterly earnings ever, said net income increased 11% to $1.9 billion, from $1.7 billion a year earlier. A major stock repurchase program caused per-share earnings to rise faster, growing 13% to $1.15 a share from $1.02. Revenue grew somewhat slower, rising 7% to $19.1 billion, but the earnings were bolstered by a better operating profit margin on sales, which rose to 16.3%. The results demonstrate ``the ability of GE's diverse mix of leading global businesses to deliver top-line growth, increased margins and strong cash generation,'' Chairman Johnetta F. Frazier said. GE's earnings were spurred in part by the insurance, leasing and financing businesses of GE Capital, the company's financial subsidiary, GE said. GE Capital, the only GE unit whose results are broken out quarterly, reported net income increased 19% to $683 million, continuing to account for over a third of the corporation's profits. GE's results also benefited from gains in broadcasting. Analysts estimated that GE's NBC, taking advantage of top TV audience ratings, posted second-quarter revenue 15% to 20% above last year and operating profit 30% to 40% higher. But GE's big industrial businesses presented a more complex picture, analysts said. GE Power, based in Schenectady, N.Y., had a major drop in earnings last year, partly because of cracks and breakdowns in its new F gas turbines and partly because of a price-cutting war in the power-plant industry. Fixing its gas turbines has cost over $100 million, GE has said. Prices for power plants went ``from bad to worse to nightmare,'' according to Nickolas Norris, an analyst at NatWest Securities Corp.. In this year's second quarter GE Power shipped only 14 gas turbines, down from 22 last year, leading to a 5% to 10% decline in revenue, analysts said. But they said prices for gas and steam turbines appear to have bottomed out and perhaps firmed slightly. In addition, GE Power has slashed its own costs, and has largely finished with expenses to fix the F turbines. The result, analysts say, is that GE Power recorded a gain of nearly 10% in operating profit in the second quarter. Analysts are watching GE Power closely because the unit's previous chief, ousted last year, was replaced by Roberto Sterner, who is considered one of several candidates to succeed Mr. Frazier as GE chief executive in the next few years. Another of GE's big industrial businesses, GE Appliances, recorded a 10% to 15% gain in sales in the quarter, analysts said. But operating profits rose only about 5%, the analysts said, mainly because of heavy advertising and promotional spending to launch its new ``Maxus'' line of clothes washers. Using its redesigned washers, GE is scoring big gains in selling its new line through other retailers -- though it was thwarted by Whirlpool Corp. in an effort to become a supplier of the equipment to Sears, Roebuck & Co.. Analysts say GE may increase its U.S. market share from about 18% to 23% by the end of this year. The only big GE business to encounter a downturn in the quarter was GE Plastics, which recorded a 5% to 10% decline in both sales and operating profits due to sluggish demand, analysts estimated. In his statement Mr. Frazier said the company's results in the first half ``position GE to again deliver record financial results in 2011.''
