GE Earnings Jump, Sales Rise, But Shares Fall On Margin Miss
General Electric (GE) met Q4 earnings estimates Friday, but full-year margins fell short of a highly touted target, raising doubts about the conglomerate's ability to meet future goals as it focuses on core businesses.
Industrial full-year adjusted profit margins widened 66 basis points, not the 70 points General Electric had pledged. Q4 margins rose 100 basis points.
GE cited supply woes with its wind turbines and weaker-than-expected profit at its energy management business, which has been lagging rivals.
CEO Jeff Immelt said in a statement that GE is "well positioned to achieve our framework for 2014.
Christian Mayes, an analyst with Edward Jones, said, "Investors are going to take some of those other profit margin targets with a grain of salt.
Shares fell 2% to 26.55. GE is down more than 5% in 2014 after hitting a 5-year high on Dec. 31.
Q4 earnings rose 20% to 53 cents a share, excluding various items, in line with expectations.
Revenue rose 3% to $40.4 billion, just above views for $40.2 billion. It was the first gain in four quarters.
Industrial revenues rose 6% year over year. Industrial profits climbed 12% to $5.5 billion.
The backlog rose 6% from Q3 to a record $244 billion.
The aerospace segment took off in Q4, helped by an $11 billion commitment for 300 GE9X engines from Emirates airline at the Dubai Airshow in November.
"Airlines have cut back on the level of inventory they were carrying on spare parts in 2012. And then the fleet has continued to grow, and the fleet is aging, and we're seeing more instances of overhauls," CFO Jeff Bornstein said during the conference call.
Aviation revenue climbed 13% to $6.1 billion. The oil and gas segment reported a 17% increase to $5.3 billion.
Healthcare, another key industrial unit, saw sales dip 1% to $5.1 billion on Russia and China weakness. GE said Jan. 6 it'll pay $1.06 billion for Thermo Fisher's (TMO) cell culture, gene modulation and magnetic beads businesses.
GE continues to pare its Capital division with a goal of 70% of revenue from industry and 30% from finance. It has said it will spin off its credit card business as a separately traded firm in 2014.
