Diversified conglomerate General Electric Co. (GE: Quote) said Wednesday that it plans to cut costs in order to boost margins and also increase sales at its industrial businesses even as the company shrinks its lending business.
At the company's annual investor meeting in New York, GE Chairman and CEO Jeff Immelt forecast a strong fourth quarter with increasing organic growth and margin expansion. The company continues to forecast double-digit growth in industrial segment operating earnings and 70 basis point growth in margins.
Fairfield, Connecticut-based GE said it expects profit from industrial units for 2014 to increase in double digits as it invests in manufacturing, offsetting a decline at its finance unit GE Capital. The company expects organic industrial revenue growth in 2014 in a range of 4 percent to 7 percent.
GE expects the share of profit from its industrial businesses to rise to 70 percent of the company's total profit by 2015, compared with about 55 percent in 2013. The company projects its total revenue for 2014 in a range of flat to 5 percent increase.
Further, GE said it aims to cut costs and drive margin improvement, targeting 17 percent segment margins by 2016.
GE said that much of its cash could be used for share buybacks and raising the dividend. The company also said it expects to continue with the strategy of making acquisition valued in a range of between $1 billion and $4 billion.
In 2013, the company aims to return $18 billion to shareholders in share buybacks and dividends, but projects a modest increase in the payout ratio for 2014.
In mid-October, GE reported a decline in profit for the third quarter from last year as revenues edged down, driven mainly by a fall in GE Capital revenue due to planned asset reductions and a negative foreign exchange impact.
Third-quarter net earnings attributable to GE common shareowners declined to $3.19 billion or $0.31 per share from $3.49 billion or $0.33 per share in the previous year. Total revenues and other income for the quarter declined 1 percent to $35.73 billion from $36.25 billion in the year-ago period.
Industrial segment sales for the quarter improved 2 percent to $25.3 billion, and profit increased 11 percent, with strong growth in six of seven Industrial businesses.
GE closed Wednesday's regular trading session at $27.41, up $0.38 or 1.41 percent on a volume of 55.27 million shares. In after-hours, the stock declined $0.06 or 0.22 percent to $27.35.
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by RTT Staff Writer
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