General Electric on Friday delivered quarterly earnings that surpassed analysts’ expectations, as its businesses producing jet engines and power turbines offset declines in its oil and gas segment, but revenue fell short of estimates.
After the earnings announcement, the company’s shares were about even in premarket trading.
GE, which backed its full-year profit outlook, said it expects to retire as much as 7 percent of its outstanding floated shares by mid-November, as it completes the spinoff of its former retail finance business,Synchrony Financial. The Federal Reserve earlier this week said Synchrony could function as a standalone company.
The company posted third-quarter adjusted earnings of 29 cents per share, down from 38 cents a share in the year-earlier period.
Revenue fell 1.3 percent to $31.68 billion, weighed by a 16 percent slump in its segment supplying equipment and services to oil and gas customers, which has been hurt by weak crude prices. Revenue in its aviation segment increased 5 percent, while revenue in its power and water division, its biggest segment, grew 1 percent.
Analysts had expected the company to report earnings of 26 cents a share on $28.57 billion in revenue, according to a consensus estimate from Thomson Reuters.
Nick Heymann, analyst at William Blair, told CNBC’s “Squawk Box” the report was better than expected and showed the GE’s industrial business now accounts for a greater share of earnings as it moves toward becoming a pure-play name in that space.
GE’s position as the sole seller in the market at present for a type of low-emissions locomotive boosted earnings, and comparisons with last year’s sales to oil and gas customers would become more favorable after the fourth quarter, he said.
However, with drillers still struggling through more than a year-long rout in commodity prices, Heymann said he does not expect end-market demand for GE products to pick up until perhaps 2017.
Sanford C. Bernstein senior analyst Steve Winoker told “Squawk Box” it’s hard to argue that GE’s 4 percent organic sales growth was not impressive.
While orders in GE’s equipment business were down 26 percent, he noted that revenue from services, which accounts for about 75 to 80 percent of total sales, was up and the company was able to hold pricing steady.
GE also said it increased profit margins by 100 basis points.
“That margin expansion … you can see that coming through these numbers. You can see it in multiple cost reduction ways, from equipment margins to overall margins, and I think that’s critical,” Winoker said.
GE said it expects to launch a share exchange for Synchrony next week, which will allow it to significantly reduce the amount of GE stock outstanding. That initiative, along with the dividend from GE Capital, puts the company on track to return about $30 billion to shareholders in 2015, it added.
GE also said it plans to sell $30 billion worth of commercial lending and leasing units to financial firm Wells Fargo.
GE has signed deals for almost all of the U.S. financing businesses that it looks to dispose of as it streamlines its business. As of Thursday’s close, GE shares were up about 11 percent on the year.