General Electric Co (GE) on Friday unveiled a surprise jump in its backlog of orders for locomotives , X-ray machines and scores of other industrial products, boosting the conglomerate’s shares and stoking hopes for gains in manufacturing around the world.
GE’s presence in most parts of the global economy, including energy, finance, manufacturing and transportation, makes it a harbinger of macroeconomic trends.
“Many customers have moved from the ‘doing your homework’ stage toward moving pen to paper and placing orders,” Morningstar analyst Daniel Holland said. “It is encouraging to see customers willing to sign agreements for a new piece of capital equipment. That indicates a level of certainty in the economic situation.”
GE’s backlog at the end of the second quarter was up 4 percent from the end of the first quarter to US$223 billion, a staggering figure that gives the company plenty of work across its seven industrial units. The order book rose 20 percent in the US alone.
“This is as close as GE comes to a positive surprise as possible,” said Tim Ghriskey of Solaris Asset Management, which owns GE shares.
Orders for jet engines, subsea oil blowout preventers, and other aviation and energy products comprise large chunks of the backlog and are widely considered to be among GE’s strongest growth areas, drawing the most optimism from shareholders.
The Fairfield, Connecticut-based company said profit fell in the second quarter, mainly due to a smaller finance unit, which GE has been downsizing since the financial crisis in a bid to reduce risk.
The results were better than expected, and chief executive Jeff Immelt said GE remains on track for a “good year.” Its shares closed up 4.6 percent at US$24.72 on Friday on the New York Stock Exchange.
At the same time, Immelt cautioned against expectations for a surge in profit late this year.
“We are not planning for an improved environment for the balance of 2013, but execution levers are in our control: a solid backlog, good technology, strong cost control and disciplined capital allocation,” Immelt said on a conference call with investors.
Some analysts remain skeptical that the conglomerate will be able to achieve its goal of boosting margins this year by 0.7 percent. GE’s operating margin last year was 11.8 percent.
“That will require Herculean improvement in the second half,” said Nick Heymann, an analyst at William Blair & Co, which trades GE shares.
The trick is for GE to turn around orders quickly so it can collect revenue from customers. It cannot recognize the US$223 billion in orders as revenue until it delivers products to customers.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by