General Electric to Push Industrials as Finance Unit Soars
Though General Electric (NYSE:GE) has one of the most diversified businesses of all U.S. corporations, the company is trying to focus on industrial operations as its risky yet profitable finance unit continues to show strength. The GE earnings report of January 17 showed strong overall growth, with a 20 percent increase in earnings-per-share over the fourth quarter of 2012, meeting expectations.
Chief executive Jeffrey Immelt said in the earnings release that the strength in GE’s U.S. business was tempered by the “mixed” environment the company faces in Europe. Immelt also noted how the company was continuing with its plan of “reducing the size of GE Capital” while the division yielded exceptional profits. On the strength of an IPO of Swiss assets, the finance unit saw 38 percent gains in earnings. Furthermore, GE Capital’s volume was up 5 percent in the fourth quarter of 2013 compared to the prior year’s figures.
On the industrial side, GE hopes to grow — segment profits jumped 12 percent on the quarter. That included a $244 billion backlog that the company said was unprecedented. Six of seven segments in the industrial sector showed growth. Other divisions helped buoy the conglomerate at the end of 2013.
The other areas of strength for GE included avitation, oil and gas, and appliances. The company saw a 20-percent boost in profits in these sectors, which may have been aided by increased efficiency in the management of GE’s many assets. Nonetheless, GE flexed its global muscle by reporting it had taken in over $1 billion in revenue in 24 separate countries in 2013.
Declarations of this nature may aim at calming the anxiety of investors still spooked by the company’s extensive holdings in the GE Capital finance division. For a division that nearly sunk the conglomerate during the financial crisis, the profits are difficult to see beyond. Yet that’s what GE must do in order to earn the full confidence of investors.
Until then, even strong earnings reports like those of the fourth quarter won’t be enough to excite Wall Street. By the end of the day following the release of its earnings report, GE had fallen over 2 percent.