General Electric Co. (NYSE:GE) posted strong numbers for its second quarter earnings. It reported operating income of $4 billion and operating EPS of $0.38, up 7% and 12%, respectively, on a year-over-year basis.  Revenues for the quarter increased 2% to $36.5 billion from the year ago period driven by 9% revenue growth in its industrial business, offset by a revenue decline in financial business and foreign exchange losses. The growth in the industrial business was driven by increasing demand from fast-growing regions including China, Southeast Asia, Latin America, Middle East and North Africa across the company divisions. Specifically, energy infrastructure and transportation businesses witnessed double-digit profit growth. The company ended the quarter with a record backlog driven by growth in the number of orders for aviation and transportation businesses.
We currently have a price estimate of $20 for the company, in-line with the current market price.
Growth in industrial businesses
GE’s industrial businesses that comprises aviation, healthcare, transportation, energy, oil & gas and home and business solutions registered 9% revenue growth with organic growth of 10%. Industrial profit also increased 7% year-over-year to reach $3.7 billion, driven by 13% growth in energy and oil & gas and 58% growth in transportation.
The impressive growth amid an uncertain global economic environment is attributable to the company’s continued investment and expansion in fast-growing geographies, particularly in Southeast Asia and China.
New orders increased 8% year-to-date driven by the growth in orders in aviation and transportation. The aviation business, which is focused on designing and manufacturing aircraft engines, witnessed growth due to a revival in the global aircraft industry. And new orders in transportation business were driven by the orders for locomotives from railroad customers in North America.
GE Capital impacts top line, but declares dividend
Revenues from GE Capital declined 8% year-over-year to $11.5 billion due to lower assets. The company has continuously reduced its exposure to risky assets post the financial crisis, impacting its top-line but contributing to the margins. And, indicative of its improved financial health, GE Capital declared a dividend of $3 billion to its parent General Electric. This led to a rise in the company’s forecast for its operating cash to $17-$19 billion for 2012.
Backed by its impressive Q2 numbers, GE has maintained its double-digit growth outlook for 2012.Notes: