GE profit tops estimates as cost cuts drive margins

General Electric (GE)reported a slightly higher-than-expected quarterly profit on Friday, as cost cuts that helped boost margins across its industrial businesses offset revenue that fell below analysts' targets.

Shares of GE rose 4 per cent to $25.21 in premarket trading.

The US conglomerate posted a 4 pe rcent rise in organic revenue, which excludes acquisitions, for its industrial manufacturing businesses, on which chief executive Jeff Immelt is increasingly focusing the company.

Although that quarterly growth did not meet some analysts’ expectations, GE said such revenue was on track to hit the higher end of its projected range of 4 per cent to 7 per cent growth for 2014.

Like those of other diverse US manufacturers, GE’s shares had been underperforming the broader market this year amid concerns about a soft global economy, after a big run-up in 2013.

“The environment is volatile, but infrastructure growth opportunities exist, and GE is executing well,”Mr Immelt said in a statement.

Mr Immelt is seeking to boost GE's earnings contribution from its industrials businesses, which include jet engines and oil and gas equipment, to 75 per cent by 2016 from 55 per cent last year, while reducing its exposure to the GE Capital finance unit.

GE’s third-quarter net income rose to $3.54 billion, or 35 cents per share, from $3.19 billion, or 31 cents per share, a year earlier.

Excluding pension costs and other special items, earnings of 38 cents per share topped the analysts’ average estimate by 1 cent, according to Thomson Reuters I/B/E/S.

Revenue rose 1 per cent to $36.17 billion, below the $36.79 billion that analysts expected.

Sales fell 2 per cent at the power and water segment, which sells energy-producing turbines and is GE’s biggest industrial division. But GE projected sales growth of at least 10 per cent in the division for the fourth quarter.

GE’s profit margin for its industrial businesses came in at 16.3 per cent, expanding by 0.9 percentage points from a year earlier. The company pointed to its efforts to simplify its operations through cost cuts and a wider gap between the price of its products and the expense of producing them.

GE has targeted increasing its industrial profit margins to 17 per cent by 2016 from 15.7 per cent last year.

Reuters