GE posts small gain in profit, sees U.S. pickup

NEW YORK (AP) — An improving outlook for the U.S. economy and signs of

stabilization in Europe sent General Electric shares to their highest

level since 2008 despite modest quarterly results.



"Orders in the U.S. were the strongest in some time," CEO Jeff Immelt

said on a conference call with investors following the release of the

company's second-quarter results Friday.



Immelt said the U.S. economic environment remained "mixed," but his

outlook marked an improvement from recent quarters, when he expressed

more caution about the U.S. market.



GE, based in Fairfield, Conn., has a broad view of the global economy

because it sells a wide variety of industrial equipment and appliances

around the world, including jet engines, medical diagnostic equipment,

oil and gas drilling equipment and washing machines.



GE's net income rose 6% in the first half of the year, and the

improved outlook raised hopes of even better growth in the second

half.



GE shares rose $1.09, or 4.6%, to $24.72 by midday. They went as high

as $24.95, the highest intraday level since September of 2008, when

the shares were in the midst of a plunge brought on by the financial

crisis.



The recovery in GE shares is not quite complete — shares would have to

rise another 15% to reach the roughly $30 per share they were trading

at before the financial crisis hit.



But the improvement in the company's share price represents confidence

in the company's transformation to a more focused industrial

conglomerate. GE is dramatically shrinking its banking division — the

giant financial services arm that threatened to pull the company apart

during the financial crisis — and shed media and other non-industrial

businesses.



"A GE back to its core roots is a very compelling investment story,"

wrote Scott Davis, an analyst at Barclays. "This is the GE we grew up

with."



At the same time, the company has beefed up divisions that industrial

equipment such as gas-fired turbines and oil and gas drilling

equipment.



GE earned $3.13 billion in the second quarter, up from $3.11 billion a

year earlier. On a per share basis, the company earned 30 cents, up

from 29 cents. Revenue fell 4%, to $35.12 billion from $36.5 billion.



Adjusted to reflect earnings from continuing operations, GE earned 36

cents per share. That's 2 cents less than adjusted earnings last year,

but one cent better than analysts polled by FactSet had expected.



GE said orders for new equipment and services grew 20% in the U.S.

during the quarter. In Europe, orders grew 2% after falling 17% in the

first quarter, helped by oil and gas orders in the North Sea and

aviation equipment and services.



"In the GE world at least (Europe) seems to have stabilized," Immelt said.



Emerging markets remained strong, he said.



The company's total orders for new business rose $7 billion, or 4%,

last quarter to a record $223 billion. Orders for oil and gas drilling

equipment and energy management equipment showed especially strong

growth; orders for transportation and power and water equipment fell.



Profit margins for industrial segments rose 0.5% in the quarter and

remain on track to post growth of 0.7% for the full year, GE said. GE

Capital earnings fell 9% for the year.



Christian Mayes, an analyst at Edward Jones, called the quarter

"ho-hum" but noticed some encouraging signs for GE. Revenue slipped at

the company's power and water division, which sells and services

gas-fired turbines, wind turbines, and water treatment equipment, but

the division's profits returned to more normal levels after a first

quarter he called "a mess."



He was also encouraged by the improved outlook for the U.S., echoing

recent comments by other industrial companies, and by GE's push to

further improve profit margins later this year.



"The back half of the year should be better for GE," he said.

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