GE Shake-Up Adds Value for Shareholders

General Electric (NYSE:GE) earnings soundly beat the Street for the first quarter, helped by strong demand for energy equipment and railroad locomotives. Both profit and revenue beat forecasts for the first quarter, prompting a 1.41 percent jump in the company’s share price in pre-market trading Friday morning after the report.

Industrial orders rose 20 percent in the January-March quarter, and selling prices improved in most of its businesses. “We witnessed broad-based strength in orders across all our infrastructure businesses and in both equipment and services,” CEO Jeff Immelt said in a statement.

The company also reported solid organic growth — a measure that factors out the influence of acquisitions or fluctuating exchange rates.

GE has lagged behind the S&P, with shares increased 6.6 percent over the past year, while the Standard & Poor’s 500 stock index rose 10 percent. Investors are now taking the report as a good sign for the rest of the industrial sector. United Technologies (NYSE:UTX), 3M (NYSE:MMM), and Caterpillar (NYSE:CAT) all report results next week.

GE reported net income of $3.03 billion, or 29 cents a share, down from $3.43 billion, or 31 cents a share, in the year-ago period. Results included a $200 million charge for exiting its Irish mortgage business.

Excluding one-time items, earnings came in at 34 cents a share, beating consensus targets of 33 cents, according to Thomson Reuters I/B/E/S. Revenue fell 8.2 percent to $35.2 billion, but was above analysts’ expectations for $34.7 billion. The decline reflects scaling back at GE Capital and sale of the company’s majority stake in NBC Universal to Comcast (NASDAQ:CMCSA). Revenue at the GE’s industrial businesses was up 14 percent.

GE’s energy and railroad locomotive units posted the strongest growth in the three months ended in March. Earnings at the company’s energy infrastructure unit climbed 10 percent to $1.52 billion, leading overall industrial profit of $3.27 billion and outpacing profit at GE Capital for the first time since the first quarter of 2010. The finance unit’s profit was little changed at $1.79 billion.

Immelt is increasing GE’s focus on divisions that make gas turbines, jet engines, and diesel locomotives while shrinking GE Capital’s balance sheet. His goal is to boost industrial earnings this year by 5 percent to 10 percent, excluding the effect of acquisitions, while expanding profit margins.

Immelt has made raising GE’s dividend and buying back shares top priorities for the year. He wants to pay back shareholders for the $12 billion in common stock the company sold in October 2008 during the financial crisis. And he wants the GE Capital arm to resume paying a share of its profit back to its parent this year, though such a move must first receive Federal Reserve approval.