GE Rises 13%, Powered by Conservation, Sales
General Electric Co. on Thursday said its third-quarter earnings rose 13%, led by its finance, medical and aircraft-engine businesses, as the company benefits from tight cost controls and higher sales.
Net income rose to $2.01 billion, or 62 cents a share, from $1.79 billion, or 54 cents, in the year-earlier period, adjusted for a 2-for-1 stock split in April, a bit better than analysts’ expectations.
As other multi-industry companies split apart in search of a higher share price, GE treats investors to returns that exceed the broader market while making everything from lightbulbs to jet engines to the “Seinfeld” TV show. GE succeeds because Chairman John Welch is relentless in pushing managers to cut costs and eliminate mistakes, analysts and investors said.
“Welch has created a management team that is ruthlessly efficient in controlling costs and being effective in creating profits,” said Bill Maselunas, a vice president at Loomis, Sayles & Co., which owns 1.7 million GE shares.
Pretax profits at 10 of GE’s 12 main businesses were higher than last year, led by GE Capital Services, GE Medical Systems and GE Aircraft Engines, the company said. The NBC broadcasting unit and GE Power Systems, which makes engines for power plants, were the two businesses that didn’t perform as well as the others, both because of year-ago quarters that had extraordinary profits stemming from one-time contracts or items, analysts said.
Profit at GE Capital rose 15% to $938 million from $816 million, GE said, accounting for about 46% of its parent’s revenue. GE doesn’t disclose profit from any of its other businesses on a quarterly basis, though it does annually. Analysts said 22 of 27 GE Capital businesses--which range from consumer credit to corporate financing--posted higher profits.
GE Capital took a charge of $180 million to $200 million for expenses related to retailer Montgomery Ward’s bankruptcy reorganization, analysts said, as well as put an additional $100 million in reserves for increased costs in its used-car financing business, analysts said. The charge was offset by gains from selling 6 million PaineWebber Group Inc. shares back to the broker in August for an $81-million gain and a tax credit of about $185 million, analysts said.
Profit at GE’s NBC unit was down compared with the year-earlier period when the network broadcast the Summer Olympics, accounting for about $600 million in revenue, analyst said. At Power Systems in the year-ago quarter, boosting profit was a contract with its Italian unit for engines that drive Russian gas pipelines.
Shares of Fairfield, Conn.-based GE rose 13 cents to close at $70.63 on the New York Stock Exchange. In the five years ended Sept. 30, GE’s shares have more than tripled, while the Standard & Poor’s 500 stock index has more than doubled. GE has the highest market value in the U.S., at about $230.6 billion.
