HeavyEquipment Sales Lift Earnings at G.E.

The General Electric Company, benefiting from spending sprees by governments in emerging nations, is getting robust orders for aircraft engines, power generators and other pieces of heavy equipment.

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A result, G.E. said yesterday, is that net earnings from continuing operations rose 7.1 percent in the third quarter, despite depressed margins in some equipment businesses and continuing problems in health care and some areas of finance.

"The technology we provide, the services we offer, all of it is driving unprecedented demand in our global infrastructure business," said Keith S. Sherin, G.E.'s chief financial officer.

G.E.'s revenue was .5 billion in the quarter, up 12 percent from last year. Its income from continuing operations was .1 billion, or 50 cents a share. G.E.'s net income for the quarter, which includes results from discontinued operations like its consumer lending business in Japan, was .5 billion, up 14 percent.

"They're exiting businesses when they don't see growth, they're investing in technology when they do," said Noel M. Tichy, a professor at the University of Michigan Business School who frequently writes about G.E. "That strategy is finally paying off."

Investors are not so sure. G.E.'s results were in line with analysts' expectations, and 14 of the 17 analysts that report their recommendations to Thomson Financial kept their buy or strong buy recommendations on the company.

But shareholders seemed disappointed nonetheless. G.E. shares, which have been steadily rising since August, tumbled 57 cents yesterday, closing at .03.

Analysts disagreed on whether G.E. was truly thriving, or just masking problems in many areas with strength in a few.

"One real surprise was how well they navigated through credit markets in such turmoil," said Deane M. Dray, an analyst at Goldman Sachs.

David Bleustein, who follows G.E. for UBS Investment Research, was far less heartened. "They could have knocked the ball out of the park this quarter, given the strength in wind turbines, in energy, in oil and gas and aircraft engines," he said. "But issues cropped up that just sapped the upside."

Indeed, many analysts noted that while the numbers came out as expected, the path to them was tortuous and confusing.

G.E. reported 0 million in unexpected product development costs in aviation and took another 0 million hit in its domestic consumer credit businesses - both numbers that may have been offset by lower taxes. It reported that its Triple A credit rating was giving it a leg up in the tumultuous credit market, but that GE Money was still tackling delinquencies in the United States. It said infrastructure orders were up but infrastructure margins were down.

It announced that as part of its cooperation with an investigation by the Securities and Exchange Commission, it had rethought its practice of booking some equipment revenue when a product was shipped, even though it reimburses customers when a product is damaged in transit.

"The tax rate was confusing, there were write-offs and charges, it just wasn't the clean G.E. quarter that the investment community was looking for," said Daniel J. Rosenblatt, an analyst with Marble Harbor Investment Counsel, which owns G.E. shares.

Mr. Sherin of G.E. readily conceded that the company gave investors a lot to digest. "We had a lot of moving parts this quarter, and people have to absorb it all," he said.

Some analysts even questioned some of G.E.'s premises for future growth.

For example, commercial finance has been one of G.E.'s fast-growing businesses, and Mr. Sherin predicted that as the credit markets grow ever more risk-averse, G.E.'s Triple A rating will lead to even more robust growth.

Richard Tortoriello, an analyst at Standard & Poor's Equity Research, doubts that. He downgraded G.E. to buy from strong buy yesterday.

"I think one impact of the subprime credit crisis will be reduced demand in the global credit market," he said. "Yes, I'm expecting good growth, maybe 12 to 13 percent a year, but not the fabulous 17 percent to 22 percent annual growth we'd been seeing."

Still, G.E. did have a fair amount of good news to report. Jeffrey R. Immelt, its chief executive, has long promised to deliver 8 percent organic sales growth - and he did just that this quarter. And he said G.E. was on track to post earnings per share of .19 to .22 for the year. Moreover, while G.E.'s margins on engines and turbines are meager, each unit it sells brings the prospect of sales of high-margin parts and maintenance contracts.

NBC Universal continued its turnaround, with profits up 9 percent. Health care remained troubled, with profits down on slightly increased sales. G.E. did not predict it would bounce back next year, "but it won't get worse," Mr. Immelt promised analysts.

But perhaps most important, G.E. expects infrastructure orders to keep rising, as emerging nations continue to build highways and railways and fleets of jets. "We are still in the early innings of the big infrastructure build," Mr. Immelt said. "It's going to be a real boomer."

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