NEW YORK, N.Y. – When it comes to weathering a sluggish economy, it pays to have your fingers in a lot of pies.
At least it does for General Electric Co.
The industrial and financial giant has a stake in almost every sector of the economy, from light bulbs and credit cards to windmills. Its mixed bag of business units have propped up the company at different times since the recession. When the real estate meltdown buried GE’s lending arm in bad debt a few years ago, its industrial units continued to grow.
This year, it’s the other way around.
A rebound at GE Capital has so far offset weaker industrial business this year. The lending unit helped GE boost profits 21 per cent in the second quarter to $3.76 billion.
GE (NYSE:GE) reported income amounting to 35 cents per share for the three months ended June 30. That compares with $3.11 billion, or 28 cents per share, for the same time last year. Revenue fell 4 per cent to $35.6 billion, in part because of GE’s sale of a majority stake in NBC Universal to Comcast in February.
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GE’s results beat Wall Street estimates for 32 cents per share on revenue of $34.7 billion, according to FactSet.
“The pillar of strength for GE has always been their diversity,” Joel Levington, an analyst with Hyperion Brookfield Asset Management. “One (business) should offset the other.” GE Capital more than doubled its profit to $1.66 billion during the quarter, driven by big gains from its credit card, mortgage, and commercial lending and leasing businesses.
GE’s lending business continues to improve after booking billions of dollars in losses and impairments during the recession. GE Capital has shed some assets, and the commercial real estate market overall has been slowly improving.
“We continue to see strong demand for credit,” GE Chairman and CEO Jeff Immelt said. Income at GE’s consumer and commercial lending businesses grew 57 per cent and 100 per cent, respectively.
GE’s industrial businesses were led by its locomotive unit, where profit for the quarter jumped nearly seven-fold to $178 million. The aviation business recorded a 9 per cent increase in earnings, and profit for its health care business increased 8 per cent.
Profits dropped 3 per cent overall for GE’s various energy and technology infrastructure units. Those results lagged smaller rivals, which reported second quarter results earlier in the week. Medical and industrial instruments maker Danaher Corp.’s said quarterly earnings jumped 74 per cent while United Technologies posted a 19 per cent gain in quarterly profit.
However, the Fairfield, Conn., company said it is seeing “especially strong” growth internationally in India, China, Southeast Asia, Africa, Russia, Australia, Canada and Latin America. International sales grew 23 per cent to $13.4 billion in the quarter.
During a conference call with analysts, Immelt said he expects GE will offer new health care products. He also thinks orders for wind turbines, especially in Canada and Australia, will lead to big revenue increases next year.
“The wind ‘wave,’ if you will, is just taking off,” Immelt said.
Earnings dropped by 19 per cent at GE’s energy infrastructure business, as prices slumped for wind turbines and other renewable energy equipment. The company has been aggressively expanding its energy business with a string of deals during the last nine months that are worth about $11 billion. GE plans to buy Converteam, Dresser Inc., Wellstream Holdings, Lineage Power Holdings and the well-support business of John Wood Group.
Shares fell 18 cents to $18.98 in Friday trading on the New York Stock Exhange.
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