NEW YORK—General Electric Co. said Friday that a surge in its lending business lifted its profit 18 percent in the third quarter, but its stock price fell on concerns about weak contributions from its manufacturing businesses.
GE is a barometer of the economy because it reaches so many industries. It builds everything from jet engines to refrigerators, and its GE Capital lending arm is involved in a variety of businesses including credit cards and real estate.
The company's industrial orders grew 16 percent in the quarter and it has a record backlog of them. However, many of those orders came more than a year ago, and the cost of raw materials and other expenses have risen since. That could erode profits.
"Prices have gone up," said Peter Sorrentino with Huntington Asset Advisors. "It keeps them from hitting" profit targets.
Shares fell 32 cents, or 1.9 percent, to close at $16.31.
The industrial and financial giant reported net income of $2.34 billion, or 22 cents per share, for the three-month period ended Sept. 30. That compared with $1.98 billion, or 18 cents per share, a year earlier. Revenue was flat at $35.4 billion.
Among GE's other businesses, aviation profit increased 7 percent to $862 million, health care grew 5 percent to $608 million and transportation increased 94 percent to $196 million. But profit declined 9 percent to $1.5 billion at its energy infrastructure business.
Meanwhile, GE's lending business is fueling earnings.
The company's overall profit has increased for four straight quarters as falling interest rates sparked a rebound at its GE Capital lending business. Airlines, railroads and other major industries have been taking out more loans for new equipment. Consumer lending is up.
The results are a big improvement from three years ago, when GE booked more than a billion dollars in charges and write downs as it quit the subprime lending market.
With its lending business increasingly healthy, GE decided in September to buy back preferred shares from Warren Buffett's Berkshire Hathaway Inc. for $3.3 billion. Buffett's investment in GE stabilized the company's finances during the U.S. financial meltdown in October 2008.
Still, analysts said, investors remain concerned GE's dependence on its financing side. Nearly a third of GE Capital's portfolio comes from loans in Europe, where a banking crisis may force the company to deal with an increasing number of delayed payments and defaults.
GE says its manufacturing side will generate a larger share of company profits in the future. The company said its industrial businesses should take home bigger profits from the revenue it generates later this year. Operating income also should rise in 2012.
Immelt said he thinks China, Brazil and other developing nations will continue to buy GE equipment and services as their expanding economies require more trains, planes, power plants and factories. The European credit crisis also appears to be a "manageable" situation for the company's lending operation, he said.
Excluding the large dividend payout to Berkshire Hathaway, GE's profit was $3.22 billion or 31 cents per share, matching Wall Street expectations.
Other large industrial companies have announced mixed results. Earlier in the week, United Technologies, which makes jet engines, elevators and other aerospace and building systems components, said third-quarter profits rose 11 percent to $1.32 billion while Danaher reported a 19 percent decline to $523.4 million.
Chris Kahn can be reached at http://twitter.com/ChrisKahnAP