Stocks mostly moved sideways on Friday. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) closed with small losses, but up for the week.
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Emerging markets stocks had a strong showing, with the iShares MSCI Emerging Markets ETF (NYSEMKT: EEM) moving up 1.4%. Retail stocks retreated; the SPDR S&P Retail ETF (NYSEMKT: XRT) lost 1.1%.
As for individual stocks, General Electric (NYSE: GE) fell despite beating earnings expectations, and Microsoft (NASDAQ: MSFT) rose on strong growth.
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Troubles continue at General Electric's power business
General Electric reported a drop in profit that wasn't as bad as what analysts were expecting, but continued struggles in its power division were a drag on the stock, which fell 4.4%. Revenue increased 3.5% to $30.1 billion and non-GAAP earnings per share came in at $0.19, compared with $0.21 last year. Analysts were expecting EPS of $0.18 on sales of $29.3 billion.
The revenue gain was helped by the merger of its oil and gas business with Baker Hughes; organic revenue actually fell 6.2% from the period a year earlier. GE reported strength in its aviation segment, with revenue up 13.3% and orders up 29%, boosted by demand for its new-generation LEAP jet engine. Healthcare grew revenue 6.2% and had a 6.9% increase in orders. Despite those bright spots, the power business, GE's largest segment, continues to deteriorate, with revenue declining 19.4%, orders dropping off 25.6%, and segment profit margin falling to 5.6% compared with 10.6% in Q2 last year.
"The second quarter was in line with expectations, and we saw continued strength across many of our segments, especially in Aviation and Healthcare," said CEO John Flannery in the press release. "We expect the power market to remain challenging, and we continue our focus on operational improvement."
GE maintained its full-year earnings outlook for EPS of $1.00 to $1.07, while saying that adjusted industrial free cash flow will come in at the low end of the previous guidance of $6 billion to $7 billion. That outlook was not enough to allay investor concerns stemming from the power business, though.
Cloud computing fuels Microsoft's quarter
Microsoft beat expectations for fiscal Q4 revenue and profit as it continues to have success with its cloud computing strategy, and shares moved up 1.8%. Revenue increased 17.5% to $30.1 billion, beating the analyst consensus of $29.2 billion. Non-GAAP earnings per share grew 6.6% to $1.13, beating Wall Street's best guess of $1.08.
All three of Microsoft's segments had healthy top-line growth. Revenue from productivity and business processes increased 13% to $9.7 billion, with Office 365 sales up 38% and LinkedIn revenue growing 37%. More personal computing grew revenue 17% to $10.8 billion, with gaming revenue jumping 39%. The intelligent cloud segment was the standout, though, increasing 23% to $9.6 billion, boosted by an 89% gain in revenue from Azure, Microsoft's cloud service.
"We had an incredible year, surpassing $100 billion in revenue as a result of our teams' relentless focus on customer success and the trust customers are placing in Microsoft," said CEO Satya Nadella. "Our early investments in the intelligent cloud and intelligent edge are paying off, and we will continue to expand our reach in large and growing markets with differentiated innovation."
Microsoft seems to be firing on all cylinders now that the company has moved so much of its business to cloud-based platforms. Looking across all segments, revenue from commercial cloud offerings grew 53% and is approaching a quarter of the company's total sales.
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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Jim Crumly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.