General Electric (GE Free General Electric Stock Report), the United States' largest industrial conglomerate and the sole remaining component of the original Dow Jones Industrial Average, has reported June-quarter earnings that bested both our and Wall Street's expectations by a penny. Factoring out one-time charges related to the former U.S. subprime mortgage and Japanese consumer finance arms, the bottom line equated to $0.38 a share. Perhaps more important, management reiterated its $1.55 earnings-per-share guidance for the full-year 2012. Our share-net figure remains at that mark, which would represent an 18% year-over-year incline, no small feat given the lackluster economic backdrop. GE shares rose modestly on the news in a down market.

Revenues rose handsomely on a sequential basis, but were still shy of most estimates. Sales came in at $36.5 billion, while a $36.8 million consensus had floated around in recent days, and our top-line call was a bit higher. We will take a look at a few key divisions, however, basically the strengthening dollar, which has the effect of making foreign sales less valuable, reduced revenues by $900 million in the quarter.

The area that posted the strongest revenue growth was the transportation unit. Here, demand for railroad locomotives was stout contributing to a 27% sales increase, to $1.6 billion. The top line grew 15% at the much larger energy segment, although an organizational change in this department took much of the spotlight (see below). Efforts to pare back operations at GE Capital continued in earnest. An 8% decline in revenues, to $11.5 billion, was illustrative of this fact.

A negative stigma surrounds the finance portion of this company, as its dealings were extremely vulnerable during the most recent recession, but its contributions to the parent company should not be overlooked. Indeed, GE got a 30% payout on that branch's 2012 earnings, and when adding in the special $4.5 billion dividend that was granted, a handsome war chest that will likely be earmarked for share repurchases has developed.

Regardless, GE makes no bones about its plans to get back to its industrial roots. This plan will not unfold overnight, however, as we envision the choppy economy leading to slow-but-steady spending increases on the industrial front. Recent energy investments have been the most visible display that things are getting better, and General Electric will need to continue to capitalize on these developments due to the fact that high-end medical devices are not flying off the shelves like they did in the past, and European markets continue to struggle.

In that vein, a $600 million contract from U.S. oil concern Chevron (CVX Free Chevron Stock Report) to maintain compressors and other equipment at that company's Gorgon natural gas project off the coast of Australia was recently inked. GE has already landed the equivalent of $1 billion in orders to facilitate this endeavor. We have been highlighting GE's need to further penetrate high-growth areas like Australia. Experts estimate there are $180 billion worth of industrial contracts up for grabs in the pipeline in that country. Out to the end of next decade, we believe that half of this company's industrial revenues will be from growth areas such as this Commonwealth. Currently, that amount sits at 37% based on 2011 revenue numbers.

Tucked in with the June-term report was the announcement that GE plans to break its energy business into three stand-alone units later this year. The energy arm, which had become the company's largest industrial unit with roughly $50 billion in annual revenues expected for 2012, will be divided as such: GE Power and Water, headed by Steve Bolze; GE Oil and Gas, under Dan Heintzelman; and GE Energy Management, which will be run by Dan Jenki. Previously, the whole branch was headed by company veteran John Krenicki, who climbed as high as Vice Chairman. Mr. Krenicki will be leaving the company. Management cited the need to speed decision making, reduce layers, and decrease costs as the driving force behind the changes.

GE has made a concerted effort in the past few years to build out its energy operations. A flurry of acquisitions that sum to roughly $11 billion has expanded the business beyond its core turbine image and into the production of equipment used in the oil and gas field. This wider base certainly contributed to the organizational alterations.

From an investment standpoint, we like this blue chip as the cornerstone of any well-balanced, diversified portfolio. For those seeking income, we point out that the dividend has been increased four times since its 2009 reduction, and we envision a scenario where it is back to pre-recession levels by 2015-2017, barring any unforeseen speed bumps on the industrial road to recovery.

About The Company: Founded in 1892, General Electric Company has grown into one of the largest and most diversified industrial companies in the world. Its variety of segments include Energy Infrastructure (30% of ’11 revenues); Aviation (13%); Healthcare (12%); Transportation (3%); Home & Business Solutions (6%); and Capital Finance (31%). On a geographic scale, more than half of General Electric’s revenues came from overseas in 2011.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.