Instant View: GE results beat forecast

NEW YORK (BestGrowthStock) – General Electric Co reported a sharply higher profit than Wall Street had forecast and sees “potential for upside” to its earlier forecast of flat 2010 results.

The largest U.S. conglomerate said on Friday net income attributable to common shareholders came to $1.87 billion, or 17 cents per diluted share per share, down 32 percent from $2.75 billion, or 26 cents per share, a year earlier.

Profit from continuing operations came to 21 cents per share, above the 16 cents analysts had expected, according to Thomson Reuters I/B/E/S. Revenue declined 5 percent to $36.6 billion.

Here are instant market reactions to the results:

JOSHUA RAYMOND, STRATEGIST, CITY INDEX, LONDON

“The results were at the top end of expectations. But GE shares have risen 5 percent in the run-up to today’s announcement, so it was priced in.

ANDREW BELL, CHIEF EXECUTIVE AT WITAN INVESTMENT TRUST, LONDON

“This will be good news for the U.S. markets as GE is taken as a bellwether.

“A combination of taking the early hit and being aggressive on cost cutting and then getting a little bit volume improvement means a big improvement on the bottom line. To see that carry through, companies need to start investing in future growth and the recovery needs to continue to gather momentum.”

PETER SORRENTINO, SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER, HUNTINGTON ASSET ADVISORS, CINCINNATI:

“They blew away the bottom line number, and it’s tough to find fault with it, but the revenue number is light. What concerned me was the backlog is constant, I’m not seeing a big pickup in orders here so I’m a little bit concerned about the pace of activity. The top-line number was not getting progressively better. It’s a cost-cutting story, not a growth story at this juncture.

“I do worry from a larger perspective that if the economy is picking up and we’re seeing an increase in exports, I would have thought we’d see a pickup in orders.

“If we don’t see a pickup in activity, the backlog is going to burn away.

“I wish the bottom line surprise had been matched with a top line surprise. It’s a cost-cutting story and right now we’re not paying for cost-cutting stories, we’re paying for growth.”

KEITH GODDARD, PRESIDENT, CAPITAL ADVISORS INC, TULSA, CO-MANAGER OF THE CAPITAL ADVISORS GROWTH FUND, WHICH OWNS GE SHARES.

“It will be viewed positively. If you are an investor in GE, what you’re hoping for is that the market will start focusing on earnings power in 2012 and the prospect of the return of higher dividends in 2011 and 2012.

“This is the low water mark for the year, for the cycle. They’re delivering, they’re shrinking GE capital.

“The reason I’m pointing to 2012 is that’s probably the first year when all the unwinding of GE Capital, the loan loss provisioning, the commercial real estate (issues), paying back the Buffett preferred (shares), will be finally behind them. They haven’t given the all-clear yet.

“You’re finished worrying where’s the bottom in GE’s earnings power. That was it. It looks better from this point forward.

“Revenues were light, so the beat was accomplished with cost cutting. There’s potential for the order trends to be viewed as negative. They didn’t expand their backlog. It was steady. If anyone is going to find weakness here it’s disappointment that the order book didn’t actually grow.”

ARTHUR HOGAN, CHIEF MARKET ANALYST, JEFFERIES & CO., NEW YORK

“If you look at the both the numbers on GE and the reaction in the after market here it looks better than expectations.

“It looks like the energy unit earnings are helping propel us a little bit. Universal did okay with $4.3 billion in revenues. I think it’s intriguing when you get a company that has so much representation in the S&P 500.

“GE is like a mini corporate America when you think of all the things that they touch. When you can get this sort of nice clean report it’s a pretty good signal that earnings season should be better than expected this first quarter.”

DAVID MORRISON, MARKET ANALYST, GFT GLOBAL MARKETS, LONDON

“GE results look neither here nor there really, with a miss on revenues but EPS a touch above. The numbers haven’t really done much at all to the market.”

GEOFF WILKINSON, HEAD OF INVESTMENT RESEARCH, MINT SECURITIES, LONDON

“It’s generally positive. But the question is how much of the good news is priced in. What we are seeing is a bit of wobbling in China after they raised their mortgage rate … the emerging market is obviously a big market for GE.

“It’s a bellwether just like Intel the other day. There is no reason why the market should come off here. But I am slightly concerned that GE is overbought here. If they get marked up today, it will be even more overbought. It’s not a rationale to prevent people from buying it but it’s a rationale for people to take some profit.”

(Reporting by Nick Zieminski and Edward Krudy in New York, Scott Malone in Boston and Jon Hopkins, Brian Gorman, David Brett and Dominic Lau in London)

Instant View: GE results beat forecast