GE Expects 10% Profit Increase, Raises Savings From Purchase

General Electric Co. said Tuesday that its 2001 profit will rise by at least 10% in a slowing U.S. economy and again raised the estimate of savings from its planned purchase of Honeywell International Inc.

The company said its earnings are ensured by an order backlog of more than $44 billion in so-called long-cycle businesses--orders for turbines, aircraft engines and expensive equipment financed and serviced over several years.

Shares of General Electric, the most valuable company by market value, rose $2.73, or 6.9%, to close at $42.33 on the New York Stock Exchange.

Some investors have said they’re concerned about the timing of the Honeywell purchase, coming as the U.S. economy edges closer to recession; GE shares fell to a 52-week low Monday. President and Chairman-elect Jeffrey Immelt said the breadth of the company’s businesses will ensure it meets expectations.

“GE has always been the epitome of a company in absolute control, and investors have been willing to pay for that,” Merrill Lynch analyst Jeanne G. Terrile wrote in a report. Negative views about General Electric stemming from the Honeywell acquisition are unfair, she wrote. She rates the stock “buy.”

General Electric, based in Fairfield, Conn., has a guaranteed revenue stream through long-term service contracts for turbines, jet engines, medical-imaging systems and other heavy equipment. The reliability of that revenue and efficiency gained from doing more business electronically will enable General Electric to meet the profit expectations “in any foreseeable economic scenario,” Immelt said.

A story in the March 18 issue of Fortune magazine suggests General Electric has used reserves, gains and charges from asset sales and restructurings to shift money among its 12 operating businesses.

That way, the company smooths the effect of higher-than-expected or lower-than-expected results within any one business, analysts said. GE has rejected all such claims.

Savings from Honeywell will total $3 billion, Immelt said. The company first estimated savings of $1.5 billion and increased the figure in December to $2.5 billion.