GE expected to post strong 4Q earnings

General Electric 4Q earnings expected to rise sharply; can growth continue in 2014?

AP

NEW YORK (AP) -- Throughout 2013, General Electric Co. suggested earnings growth would be strongest late in the year. Investors are now expecting to see that strength when GE reports its fourth quarter earnings Friday.

Analysts expect the company's fourth quarter adjusted earnings per share to jump 20 percent compared with the fourth quarter of 2012, according to FactSet.

GE is in the midst of a transformation to simpler, narrower industrial company that makes and services complex industrial equipment. It is in the process of shrinking or getting rid of other businesses such as media companies and banking operations. GE announced its latest effort late last year, when it said it would spin off its banking division that issues consumer credit cards sometime in 2014.

Investors have largely cheered the moves — GE shares have risen 27 percent over the past year, slightly better than the S&P 500 index over the same period. Earnings growth hasn't been nearly as strong, however. The company's adjusted earnings per share rose 2.7 percent through the first three quarters of 2013 — which is why investors will be looking for such a strong result in the fourth quarter.

WHAT TO WATCH FOR: While investors are generally happy with the changes GE is making, they will want to see whether and how GE can keep up its earnings growth in the next year or two as its transformation continues. The loss of revenue and profit from the businesses it is shedding may be difficult to fully compensate for with growth in other areas.

WHY IT MATTERS: Because of its size and global reach, GE has a unique perspective on the state of economies around the world. Its financial performance is considered a bellwether. GE's industrial operations make and service a range of products; including refrigerators, CT-scanners, wind turbines, power generation equipment, oil and gas drilling equipment and engines for jets and trains. GE Capital issues credit cards and provides loans for businesses.

WHAT'S EXPECTED: Analysts expect earnings of 53 cents per share, adjusted to remove the effect of one-time items, on revenue of $40.27 billion, according to FactSet. For all of 2013, analysts expect earnings of $1.63 per share on revenue of $146.35 billion.

LAST YEAR'S QUARTER: In the same three-month period of 2012, GE reported net income of $4.01 billion, or 38 cents per share, on revenue of $39.33 billion. When results were adjusted to remove the effect of asset sales and other one-time items, GE earned 44 cents per share in the fourth quarter of 2012.

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