General Electric's 4Q Earnings Expected To Be Higher As Industrial Expansion Proceeds

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General Electric CEO and Chairman Jeffrey Immelt
General Electric CEO and Chairman Jeffrey Immelt

General Electric Company (NYSE:GE), the massive conglomerate that lends money, makes industrial equipment and licenses technology, is expected to post higher fourth-quarter profit on strong sales of gas turbines and jet engines.

The 121-year-old company, based in Fairfield, Conn., reports fourth-quarter and full-year 2012 earnings Thursday before the market opens.

Analysts polled by Reuters expect, on average, net income for the quarter of $4.5 billion, an 18 percent increase over the year-earlier quarter. Earnings per share are expected to be 43 cents, a 10 percent gain over EPS of 39 cents in the fourth quarter of 2011. Revenue is anticipated to be $38.72 billion, virtually the same as the $37.97 billion of the year-earlier quarter.

For all of 2012, analysts expect net income of $15.71 billion, or $1.51 EPS, on revenue of $147.04 billion. That compares with all of 2011, when GE booked net income of $14.44 billion, or EPS of $1.23, on revenue of $147.3 billion.

Despite the relatively flat revenue, Standard & Poor’s expects segment operating margins to have risen over the course of 2012 to 15.1 percent from 14.2 percent in 2011.

The company’s turbine business hit a milestone in the fourth quarter: In November GE announced the sale of its 20,000th wind turbine. The company also announced turbine sales to customers in Saudi Arabia, Poland, Bangladesh, the U.S., Hungary, Brazil and Myanmar during the fourth quarter. One of the largest deals announced in the three-month period was a $394 million contract for 230 wind turbines for Brazil’s Renova Energia.

A number of so-called bolt-on acquisitions figured in the fourth quarter, as GE redeployed capital to industrials. In November, the company announced the purchase of U-Systems, which makes ultrasound products for medical purposes. That same month, GE said it bought LED fixture maker Albeo Technologies Inc., and the following month it announced a deal to pay $4.3 billion for Italian aerospace company Avio SpA, a longtime partner in its jet engine business. The Avio acquisition is expected to close late this year.

GE Capital was named agent on a $200 million credit line for Furniture Brands International, Inc. (NYSE:FBN) of St. Louis, a $173 million credit line for Rand Logistics Inc., which owns and operates 16 dry bulk vessels, and a $300 million credit line to Rentech Nitrogen LLC.  It also announced a $150 million debtor-in-possession financing arrangement with Vertis Holdings in October.  

The company's U.S. business faced headwinds, as "fiscal uncertainty slowed activity in the fourth quarter,” CEO Jeffery Immelt said Dec. 17, 2012, at an investor meeting. “We definitely have seen a slowdown in the fourth quarter (in) businesses like health care and business demand for credit, and (the) appliance industry is flattish,” he said.

Despite such challenges, Immelt anticipates fourth-quarter “organic growth at 8 percent with a slightly tougher macro environment in the fourth quarter, but still 8 percent is two or three times (more) than most of our peers.”

Last month GE boosted its dividend 12 percent to 19 cents per share, resulting in a dividend yield of 3.6 percent.

For all of last year the stock rose to $20.99 from $17.91, but in the fourth quarter they fell from $20.99 from $22.81.  

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