General Electric Co expects rising demand for heavy equipment including medical imaging devices and railroad locomotives to drive strong profit growth in 2011, even as margins come under pressure from costs related to research and acquisitions.

It forecast 2011 sales would be flat to up 5 percent, ahead of Wall Street estimates for slightly lower sales next year.

Things are definitely getting better, we're seeing it across the portfolio right now, said Jeffrey Immelt, chief executive of the largest U.S. conglomerate. The performance is strengthening in the fourth quarter and we see good momentum as we go into 2011 and beyond.

The world's largest maker of jet engines and electric turbines expects to end the year with about $20 billion in cash, which it will devote to boosting its dividend, buying back shares and acquiring small companies worth $1 billion to $3 billion, said Immelt, who next year marks his 10th anniversary at GE's helm.

At the end of the day, it's about the revenue, said analyst Brian Langenberg of Langenberg & Co. This is reasonable revenue guidance.

Langenberg he expected GE shares to reach $22 within a year and $35 within three years.

The share rose 7 cents to close at $17.69 on the New York Stock Exchange.


GE's forecast follows several recent signs an economic recovery is gathering steam, even though unemployment remains high in many large economies, including the United States. U.S. retail sales increased for a fifth straight month in November, the start of the holiday season.

Corporate America's view of the economic recovery has been gradually improving over the past few months.

Last week, fellow blue-chip manufacturers 3M Co and United Technologies Corp said they were looking for profit to rise about 10 percent next year at their midpoints.

Earlier on Tuesday, the Business Roundtable reported that CEO confidence in the economy spiked to a four-year high in December, with some 80 percent of corporate chiefs expecting sales to rise over the next six months.

As I think about 2011, I feel a lot better than I've felt in the last two years, in terms of what's going on in the global marketplace, Greg Hayes, chief financial officer at United Tech, told investors on Tuesday.


GE, whose products range from wind turbines and industrial technology to machines used in hospitals and a large financing arm, has been counting on strong growth outside the United States, particularly in China, India and the Middle East, to offset a sluggish recovery at home.

Sales in China will rise in the high double digits in 2011, it said. Its industrial businesses will grow next year and accelerate in 2012.

Analysts on average expect the company to post 2011 profit of $1.27 per share, up 13 percent from expected 2010 levels, on revenue of $145.4 billion, down 3 percent.

Fairfield, Connecticut-based GE has ceased providing specific per-share profit targets, instead offering a framework of how it expects its businesses to perform. Immelt said he did not expect to resume EPS guidance, despite improved visibility.

Although the company said profit margins would be lower in 2011 because of acquisition costs and research and development spending, Immelt said his vision for its industrial units was to grow at a multiple of GDP and expand margins at the same time.

The arithmetic just works that we should be able to grow earnings at 10 percent, Immelt told analysts and investors at a meeting at the company's New York office. Let's see where the economy goes.

Immelt said GE planned to buy back Berkshire Hathaway Inc's preferred stake in the company by next October. GE sold a $3 billion preferred stake to Warren Buffett's Berkshire in October 2008.

The company is winding down its restructuring mode. The fact that they're talking about growth at all is modestly above where many analysts have been, said Keith Goddard, manager of the Capital Advisors Growth Fund which owns GE shares.

GE next year will begin reporting operating results, which exclude some noncash pension expenses, as its primary measure of performance, Immelt said. Honeywell International Inc changed its approach to pension accounting this month in an effort to make its results more comparable to peer companies.

Honeywell is due to lay out its expectations on Wednesday.

(Additional reporting by Nick Zieminski and James Kelleher; editing by John Wallace, Matthew Lewis and Andre Grenon)