General Electric Co. (GE:US) led the Dow Jones Industrial Average to its highest level since 2007 after fourth-quarter profit topped analysts’ estimates, with across- the-board growth in industrial businesses surpassing gains in finance.
Adjusted profit from continuing operations rose 13 percent to $4.67 billion, or 44 cents a share, the company said in a statement, topping an average (GE:US)projection from analysts of 43 cents. GE climbed 3.5 percent to $22.04 in New York, making it the biggest advancer among the 30 Dow Jones companies.
Emerging-market expansion fueled the aviation and health- care divisions, which drove industrial performance and helped build a record $210 billion order backlog. That validated Chief Executive Officer Jeffrey Immelt’s strategy of focusing on manufacturing, valued more highly by investors, while shrinking the finance unit after the global credit crisis.
“You see the slow but steady transition to industrial leadership to drive GE’s growth,” Nick Heymann, an analyst at William Blair & Co. in New York, said in an interview on Bloomberg TV with Tom Keene. “Order growth, while it slowed, didn’t stall and you continue to see better pricing.”
Earnings at GE Aviation, the world’s largest maker of jet engines, climbed 22 percent to $1.04 billion, and industrial profit advanced 12 percent. At GE Capital, the finance unit that specializes in lending to small and medium-size companies, profit increased 9 percent to $1.81 billion in the quarter.
Immelt continued to make progress on his pledge to shrink GE Capital’s balance sheet and reduce its contribution to earnings. The unit’s ending net investment, a measure of its assets, declined to $419 billion as of Dec. 31, an 18 percent decline since January 2009.
Including pension expenses and other items, GE’s fourth- quarter net income climbed 8 percent to $4.01 billion, or 38 cents a share, from $3.73 billion, or 35 cents, a year earlier.
Total sales climbed 4 percent to $39.3 billion in the quarter. Excluding the effects of foreign exchange and declining demand for wind turbines with an expiring U.S. tax credit, industrial orders rose 7 percent, the company said.
GE overcame a year-end slump that deepened as President Barack Obama and his opponents in Congress negotiated to avoid $600 billion of spending cuts and tax increases. Organic industrial sales growth of 4 percent slipped from an 8 percent gain in the third quarter.
Profit margins at GE’s industrial businesses, which also include oil and gas equipment, widened 1.2 percentage points in the fourth quarter from a year earlier, GE said in the statement. They expanded 0.3 percentage point overall in 2012, matching the company’s forecast.
GE’s advance today compared with a 0.4 percent rise for the Dow Jones index and a 0.3 percent gain for the Standard & Poor’s 500. The Fairfield, Connecticut-based company rose 17.2 percent last year, outpacing a 7.3 advance for the Dow Jones.
Full-year profit advanced 8 percent to $16.1 billion, or $1.52 per share, on $147.4 billion in sales, which were little changed.
Industrial revenues in emerging markets climbed 11 percent last year, GE said. In China, sales increased 19 percent to about $6 billion, lead by the health-care unit’s 22 percent advance.
“We’ve got a very good business presence in China and it’s really performing well for us,” Chief Financial Officer Keith Sherin said in a telephone interview today. “We’re moving west and developing new products in China for that market, and it shows in the results we’re seeing.”
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