FAIRFIELD, Conn. ― General Electric Co. reported an 18 percent profit rise that met Wall Street’s expectations, helped by strong revenue growth in key foreign markets including Brazil, Russia and China.
The largest U.S. conglomerate said on Friday it expects earnings to rise at a double-digit percentage rate next year, following peer United Technologies Corp in trying to assuage investors’ fears about Europe’s brewing debt crisis.
“We continue to successfully navigate a volatile global economy,” Chief Executive Jeff Immelt said in a statement.
Investors took heart in the company’s 16 percent growth in industrial equipment orders — an important indicator of future revenue, and in the 25 percent rise in international sales. GE has been counting on strong demand in rapidly developing economies to offset weak U.S. and European demand.
“The revenue number was strong and the organic growth rate in industrial was strong,” said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire. “Those are telling and they give us a little bit of a look into next quarter and beyond.”
But GE shares declined 1.4 percent to $16.40 in premarket trading as some raised concerns that its profit margins were weaker than expected in the quarter, with a low tax rate helping the company to meet expectations.
“Margins missed our forecast and were down year on year in the four big industrial businesses,” said Jeffrey Sprague, managing partner at Vertical Research Partners. “There is little or no operating leverage in GE’s portfolio due to low priced equipment in backlog and R&D headwinds.”
The report comes amid a wave of generally strong earnings reports from big U.S. manufacturers. Also on Friday, Honeywell International Inc reported a 45 percent profit rise. Fellow blue chips Caterpillar Inc and 3M Co will report next week.
Still, investors remain concerned whether Europe’s crisis could drag down global demand by shaking the financial system.
“Possible concerns going forward are going to be related to Europe and what impact that may have, not just there but on global growth in general,” said Perry Adams, vice president and senior portfolio manager at Huntington Private Financial Group in Traverse City, Michigan. “There’s elevated uncertainty.”
The world’s biggest maker of jet engines and electric turbines reported third-quarter earnings attributable to common shareholders of $2.34 billion, or 22 cents per share, compared with $1.98 billion, or 18 cents per share, a year earlier.
The results included an 8-cent-per-share charge to buy back the preferred shares the company had sold to Warren Buffett’s Berkshire Hathaway Inc during the financial crisis.
Buying back the Buffett stake, which carried a preferred dividend, will boost GE’s annual earnings by 3 cents per share in the coming years.
Factoring out one-time items, profit came to 31 cents per share, meeting analysts’ average forecast, according to Thomson Reuters I/B/E/S.
Revenue was little changed at $35.37 billion, above the $34.94 analysts had forecast.
GE’s weak point on profit remained its big energy infrastructure division, where earnings slipped 9 percent despite a 30 percent rise in revenue, reflecting pricing pressure on wind turbines. The company has said that business will resume profit growth next year.
“That’s bottoming out. It will start to turn up probably in the next quarter but definitely in 2012,” said Harbor’s De Gan. “It’s a margin issue. Margins have contracted because wind is just so terrible.”
Before today, GE shares had fallen about 9 percent so far this year, while the Dow Jones industrial average has declined less than 1 percent.