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Earnings Preview: Investors watch GE outlook

Jonathan Fahey, AP Business Writer

NEW YORK (AP) -- General Electric Co. is expected to post a dip in profit for the second quarter — but it is also expected to outline a robust outlook for the rest of the year when it reports results Friday.

"We anticipate an uninspiring quarter from GE," Christopher Glynn, an analyst at Oppenheimer & Co., wrote in a recent report. "We expect strong orders, however."

GE's results in recent quarters have been helped by the growing economies of the developing world and a slowly improving U.S. economy, but held back by a weak economy in Europe.

The company is in the midst of transforming itself into a more focused conglomerate that sells industrial equipment, services and appliances. It is shedding divisions such as NBC Universal and shrinking its banking operations.

The move appears to be working — GE's net income has grown in each of the past four quarters compared with the year earlier. But results have been helped by asset sales and other nonrecurring items, and analysts are still looking for sustained growth from all the company's industrial divisions.

That probably didn't happen in the second quarter, analysts say. But in recent months the company's backlog of business — orders that have been placed but not yet filled — has shown strong growth. Analysts expect GE to update investors on the company's progress in turning those orders into sales.

WHAT TO WATCH FOR: GE's adjusted earnings are expected to slip in the quarter, but investors expect rosy growth projections for the rest of the year. Sales and orders for gas-fired turbines, aircraft engines and oil and gas drilling equipment are all expected to rise substantially this year.

WHY IT MATTERS: GE sells a broad array of equipment and services around the world, so its financial performance can shed light on the state of the global economy. GE sells aircraft engines, appliances, locomotives, medical devices such as CT scanners, gas-fired turbines, wind turbines and oil and gas drilling equipment. GE is a component of the Dow Jones industrial average.

WHAT'S EXPECTED: Analysts expect GE to make 35 cents per share, adjusted to exclude special items such as asset sales, according to FactSet. That would be 3 cents per share less than the company's adjusted earnings of 38 cents per share during last year's second quarter. Analysts expect revenue of $35.6 billion, a decline of 3 percent from last year.

LAST YEAR'S QUARTER: GE earned $3.1 billion, or 29 cents per share, on revenue of $36.5 billion in the second quarter of 2012. Last year's quarter was hurt by charges from financing companies that had been sold off several years before.


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