GE posts 80% rise in profits for Q1

GENERAL Electric (GE) posted an 80% rise in first-quarter profit, helped by a strong recovery in its finance arm, that topped Wall Street expectations.

But the results, which followed a series of better-than-expected earnings reports from top US manufacturers, failed to impress investors and shares of the largest US conglomerate fell 2% yesterday.

First-quarter earnings attributable to common shareowners came to $3.36 billion (€2.34bn), or 31 cents per share, up from $1.87 billion, or 17 cents per share, a year earlier.

The world’s biggest maker of jet engines and electric turbines also raised its dividend for the third time since July.

However, chief executive Jeff Immelt warned investors that GE does not plan to keep up that pace of increases and is likely to start reviewing the payout annually.

Analysts noted GE’s 6% rise in revenue — which came across all divisions — may have been inflated by a change in its fiscal calendar that added six days to the first quarter.

“Many folks in the stock market today have high expectations,” said Peter Klein, senior portfolio manager at Fifth Third Asset Management in Cleveland.

“GE is up from $7 in the depths of the selloff to $20-$21 and maybe it is forming more of a psychological barrier at that level.”

The company was part of a wave of top US manufacturers that have topped analysts’ first-quarter profit expectations.

United Technologies, Honeywell International and Danaher also did so and went on to raise their profit forecasts for the year, saying the US economic recovery is firming out and that demand from emerging markets, including China and India, remains robust.

GE does not give per-share profit forecasts, but Mr Immelt told investors that he expects “very solid operating earnings growth” this year.

GE also raised its quarterly dividend by one cent to 15 cents, for a 50% cumulative increase since July. GE aims to pay out 45% of its profit to shareholders.

“Over time we’re going to get back to an annual dividend increase,” Mr Immelt said.

Fellow blue-chip manufacturer United Tech, which last week hiked its payout by 12.9%, aims to raise its dividend every five quarters.

Since emerging from the financial crisis and selling a majority stake in television network NBC Universal to Comcast Corp, GE has invested heavily, spending $14 billion on takeovers over the past year. That pace of dealmaking is likely to slow.

“Our major transactions are done for 2011,” Mr Immelt told investors.

“Dividend and (share) buybacks take higher priority for the rest of the year,” he said.

Some investors expressed concern about GE’s recent push in the energy sector. It was the one GE division to see profit fall in the quarter, though GE officials said they expect it to turn around later this year.

“Energy’s hot right now and they’re buying, which means they’re not getting rock-bottom valuations,” said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire. “Time will tell if they overpaid or not.”