General Electric Co (GE.N) reported a better-than-expected 7.5 percent rise in fourth quarter profit and a sharp increase in its backlog of equipment orders, sending its shares higher.
GE, the largest U.S. conglomerate, notched strong earnings growth at units that make jet engines and equipment used in oil and gas production, with results benefiting from Chief Executive Jeff Immelt's efforts to boost its presence in the energy industry in recent years.
The order backlog, watched by investors as an important indicator of future sales growth, hit a record high $210 billion (132.3 billion pounds) in the fourth quarter, up from $203 billion in the third quarter.
"The backlog was a really good number. I didn't expect to see a $7 billion, 3.5 percent rise in the backlog," said Jack De Gan, chief investment officer at Harbor Advisory Corp, which holds GE shares. "Orders in the fourth quarter must have been really good for the industrial side."
Orders were up 2 percent, and would have been up 7 percent without a sharp drop in demand for wind turbines related to the expected expiration of a tax credit.
GE shares were up 3 percent to $21.94 in early Friday afternoon trading on the New York Stock Exchange.
Solid demand in China and oil-producing countries helped to offset unsteady economies at home and in Europe, Immelt said.
"We saw real strength in the emerging markets and the developed regions stabilized," Immelt told investors on a conference call.
REVENUE TOPS EXPECTATIONS
GE, the world's biggest maker of jet engines and electric turbines, said fourth-quarter earnings rose to $4.01 billion, or 38 cents per share, from $3.73 billion, or 35 cents per share, a year earlier.
Factoring out one-time items, profit came to 44 cents per share, a penny ahead of analysts' estimates, according to Thomson Reuters I/B/E/S.
Revenue rose 3.6 percent to $39.33 billion from $37.97 billion a year earlier. Analysts expected revenue of $38.76 billion.
Profit increased across all divisions, with the jet engine unit notching 22 percent growth and GE Oil and Gas, which makes equipment used in energy production, up 14 percent.
Profit at the GE Capital finance arm, in the process of being scaled back, rose 6 percent.
"They saw some good organic growth in the industrial part of their business. GE Capital was a strong contributor," said Oliver Pursche, president of Gary Goldberg Financial Services, a GE shareholder.
Over the past few years, Fairfield, Connecticut-based GE has boosted its position in the energy industry, broadening its lineup of equipment used in oil and gas production and mining, with an eye toward capitalizing on surging U.S. natural gas production. GE also makes medical equipment and railroad locomotives.
At the same time, Immelt has made cost-cutting a major thrust across the company, with an eye toward raising operating profit to about 15.8 percent of sales by the end of 2013.
At Thursday's close, GE shares were up about 12 percent during the past 12 months, topping the 9 percent rise in the Dow Jones industrial average .DJI.
GE kicks off a wave of earnings reports from the nation's largest manufacturers, with United Technologies Corp (UTX.N), 3M Co (MMM.N) and Honeywell International Inc (HON.N) all due next week.
(Reporting by Scott Malone; Additional reporting by Ernest Scheyder in New York; Editing by Jeffrey Benkoe and Tim Dobbyn)