Analyst Round-Up GE: Goldman Calls Results a 'High Quality Beat', Deutsche Notes Strength in Industrial Margins

General Electric Co. (NYSE: GE) said Friday that it saw a 1 percent rise in second-quarter profit, after nine consecutive quarters of declines, bolstered by strong demand for healthcare and oil and gas equipment.

Shares fell back more than 4 percent Friday as traders sold the news.

The largest conglomerate in the U.S. reported second-quarter earnings of $3.03 billion or 30 cents per share, up from $2.61 billion or 27 cents in the same quarter last year. Revenue for GE in the three month period ended fell 4.3 percent to $37.44 billion from $39.1 billion last year. For GE Capital Services, revenue fell 2 percent in the quarter to $13.1 billion

Reacting to the results from GE, analysts from Goldman Sachs called the quarter a "high quality beat." "We would expect shares to rally on the news. It is increasingly clear that GE Capital will grow as credit losses continue to cycle down. However, the outlook is less clear for GE Industrial – which we view as a higher multiple business – given the later cycle nature of the portfolio.”

At Deutsche Bank analysts believe the highlight of GE’s second quarter was the company’s “exceptionally” strong industrial margin performances, which rose 70 bps year-over-year to 17.3 percent.

“We have the positive of earnings upside which will likely drive FY10 consensus numbers higher and the first core Capital beat since the onset of the financial crisis. But this needs to be balanced against continued revenue weakness in Industrial.”

Lastly, analysts at Oppenheimer said “Segment profits accounted for the beat on the surface, but a higher industrial tax rate than we expected was offset by $0.02 benefit from lower "items and eliminations" expense. GE's results appear consistent with expectations trend-wise, with some positive delta attributable to Energy Infrastructure OM, Capital Finance and lower items.”

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