General Electric Co reported a sharply higher profit than Wall Street had expected and sees potential for upside to its earlier forecast of flat 2010 results.

The largest U.S. conglomerate, whose shares rose 2.6 percent in premarket trading, said on Friday orders for healthcare and oil and gas equipment were strong, and that margins at its industrial arm had improved after two years of job cuts and asset sales.

It also said the worst was behind its beleaguered financial arm.

The largest U.S. conglomerate said on Friday net income attributable to common shareholders came to $1.87 billion, or 17 cents per diluted share per share, down 32 percent from $2.75 billion, or 26 cents per share, a year earlier.

Profit from continuing operations came to 21 cents per share, above the 16 cents analysts had expected, according to Thomson Reuters I/B/E/S.

Revenue at the world's biggest maker of jet engines and electricity-producing turbines declined 5 percent to $36.6 billion. That was less than the $37.1 billion analysts had forecast.

Our 2010 framework remains achievable with potential for upside, said GE Chief Executive Jeff Immelt, who has engineered a major shift in GE's portfolio of businesses, including pruning its hefty finance arm and selling a majority stake in its NBC Universal media business to No. 1 U.S. cable operator Comcast Corp .

GE, which also makes railroad locomotives and CT-scan machines, no longer provides investors with numeric per-share profit targets, instead offering an annual framework of how it expects its individual divisions to perform.

Orders were down 8 percent to $17.1 billion in the quarter, but the company said its total backlog held steady at $174 billion.

They blew away the bottom line number, and it's tough to find fault with it, but the revenue number is light, said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati, which holds GE shares in its portfolios.

But he was concerned that the backlog remained constant. I'm not seeing a big pickup in orders here so I'm a little bit concerned about the pace of activity, he added.

GE shares were up 2.6 percent, or 50 cents, at $20 in premarket trading. They have risen approximately 68 percent over the past year, outpacing the 40 percent rise of the blue-chip Dow Jones industrial average <.DJI>.

(Reporting by Scott Malone; Editing by Derek Caney)