GE Sees $3 Bil From Spinoff As Q2 EPS Meets

July 18, 2014

GE's second-quarter earnings met estimates Friday, as strength in its energy and aviation units offset weakness elsewhere, but the conglomerate could net $3.1 billion from the IPO of its North American consumer finance unit this month.

Per-share earnings rose 8% in Q2 to 39 cents, in line with consensus forecasts. Revenue edged up 3% to $36.2 billion, missing views for $36.3 billion.

Shares closed down 0.6%.

Profit from GE's (GE) industrial segment rose 9% to $4.2 billion as margins expanded 20 basis points. Industrial revenue rose 7%, with aviation sales up 15% and oil and gas sales up 20%.

"We expect a very strong North America industrial environment," said Jim Corridore, an analyst at S&P Capital IQ. "I think that we are also going to see a strong global backlog .

GE's strong showing at the Farnborough Airshow was evidence of that. GE and CFM, a joint venture with Snecma, inked jet engine deals worth over $36 billion, including pacts with Emirates, easyJet and American Airlines (AAL).

Meanwhile, GE's health care, appliances and lighting units struggled. Bloomberg recently reported that GE is in talks to sell its home appliance unit.

Selling appliances helps GE reach its large individual investor base, noted Edward Jones analyst Christian Mayes: "They get an element of free marketing for their stock.

GE is focused on its core industrial operations and beat out Siemens and Mitsubishi last month for control of Alstom's energy assets. GE said the deal is set to close in 2015 and would add 6-9 cents per share to 2016 earnings.

As part of its industrial focus, GE plans to sell 125 million shares of consumer finance unit Synchrony for $23 to $26 each by the end of July.

GE expects proceeds from the IPO to reach $3.1 billion.

Fellow diversified manufacturer Honeywell (HON) also reported Q2 results Friday. Earnings rose 8% to $1.38 per share, beating forecasts by 2 cents. Revenue climbed 6% to $10.25 billion, topping views for $10.19 billion.

Aviation sales were flat at $2.99 billion. Transportation sales grew 8% to $1.01 billion, led by car turbo chargers.

Honeywell raised the low end of its full-year EPS outlook to $5.45 from $5.40 and maintained the top end at $5.55. Analysts expect $5.54.

But it cut its sales outlook to $40.2 billion to $40.4 billion, now fully below analysts' views, from $40.3 billion to $40.7 billion. But shares rose 1.7%.