With a market capitalization of $230 billion, General Electric's  not the most nimble company out there. Instead of a quick-moving sports sedan, GE would probably be a lumbering tractor-trailer.

A few years ago, that tractor-trailer found itself veering into a ditch on the wrong side of the road. That ditch was full of toxic assets, a product of GE's foray into risky financial transactions. Since then, GE's management team has been focused on both right-sizing this massive vehicle and steering it in the right direction. Slowly but surely, GE's shifting its focus from banking to manufacturing innovation once again.

Shareholders, like the frustrated drivers trying to avoid the sidelined 18-wheeler, have grown somewhat impatient. But this vehicle appears to be turning a corner -- GE's recent year-end results show that the company is hitting on all cylinders. And the global economy's providing a boost as well.


Steady revenue and rising backlog
While GE's $150 billion in revenue no longer matches the pre-crisis level of $180 billion, investors focusing on top-line growth are missing the real story. This year, GE aimed to right-size and strengthen its formerly risky GE Capital unit, and the company did just that. In the fourth quarter, GE Capital profits climbed 12% despite revenue gains of only 2%. An additional $1 billion in dividends was paid by the financial unit to the parent, increasing year-to-date payouts to $6.4 billion. Meanwhile, GE's reducing the cash dedicated to GE Capital, known as ending net investment (ENI). The figure for ending net investment declined from $444.7 to $418.6 billion, or 6.2%, in 2012.

GE's navigated a tough turnaround, but it's not quite cruising in the fast lane. Overall revenue grew only 4% during the year, indicating the company's still puttering along. GE should pick up speed, however, and investors have some visibility into future growth through the company's backlog. In 2012, GE's backlog, also known as orders booked, increased to a record high of $210B. GE's experiencing robust demand on the industrial side of the business, which grew organically by 8% in 2012 and generated 12% growth in profits. Given relative strength in many of GE's most promising markets, this growth should continue into 2013. Strong industrial organic growth coupled with expanding profit margins bodes well for GE shareholders in the coming year.

Widening profits

Looking forward, GE's forecast for even further profit margin expansion was the most promising aspect of the recent conference call. Management estimates it can grow industrial profit margins in 2013 by 70 basis points, or 0.07%. Compare that with 2012's expansion of 30 basis points, and investors can look forward to continued profit growth in GE's most critical industrial segments. The following chart reflects fourth quarter profit growth across all of GE's businesses, including GE Capital.

As shown, GE's energy businesses, including power and water, oil and gas, and energy management, bolstered the company's bottom line. Combined, these three segments contributed more than 35% of GE's profits during the fourth quarter. On the whole, every segment except home and business solutions posted positive growth during the quarter, amounting to 11% growth overall.

Dividends with a dash of upside
A growing backlog and fatter profit margins are great news, but where's the upside from here? For a second, let's consider recent returns to shareholders. First off, GE raised its dividend five times in the past three years, which amounts to a greater than 3% yield today. GE Capital also paid a special dividend of $4.5 billion to the parent, a one-time transfer that will likely recur in 2013 has GE continues to shrink its financial arm. In terms of share repurchases, GE's made a concerted effort to reduce the share count to less than 10 billion shares outstanding, providing investors with a larger piece of the pie going forward.

At the same time, GE's stock price appreciated 17% during 2012, surpassing the S&P's performance by 3.5%. Still, GE has a variety of long-term investments that are just beginning to take root. Take wind, for instance, where GE controls over 40% of the American wind turbine market. In the coming year, the extension of the tax subsidy for wind producers places GE in a prime position to continue its push into wind, the fastest growing source of new electrical generation in the United States.

Likewise, GE controls 35% of the global market for natural gas turbines, facing off with its struggling counterpart, Germany-based Siemens . Expect this natural gas market to continue its rampant growth as well. The projected global increase in power demand is equivalent to the output of more than 2,000 large power plants over 25 years, many of which will likely be fueled by natural gas because of its lower carbon emissions.

Finally, GE remarked on its progress in developing fascinating new opportunities, including the industrial Internet. In a November 2012 report, GE claimed this so-called "Internet of things" could find direct application in sectors accounting for $32.3 trillion in economic activity. So the opportunity's obviously tremendous, and so far GE's making headway. In 2012, the company announced nine new industrial Internet service offerings, with 20 more currently in the pipeline. While it's difficult to assign a value to this futuristic network of machines, it shows that GE's capable of investing in what Google  founder Larry Page recently referred to as "moon shots." These massive bets can only be made by companies with huge research and development budgets, but the willingness to take such risks can payoff in the long run. After all, what sounds like an impossible sci-fi fantasy can all too quickly become a reality in this day and age.

A view into the future
Predicting that the industrial Internet will emerge as the "third industrial revolution" might be a stretch, but getting a glimpse of GE's future is not completely far-fetched. Expect management to continue focusing on its core businesses, those industrial segments creating value in energy, health care, aviation, and infrastructure markets around the world. Similar to 2012, GE expects to generate double-digit earnings growth in these segments, and steadily rebounding economies appear to be facilitating that growth. Whether GE really starts to accelerate in 2013, however, will depend on a few key factors. Most notably, robust growth in emerging markets, a strong housing rebound, and a stable Europe bode well for GE's road ahead.

Despite being sidelined a few years ago, GE's quietly emerging as one of the strongest blue chip stocks on the market. Furthermore, the stock's trading at a reasonable valuation of 11 times forward earnings. For investors, now might be the time to get on board. 

Dig deeper
For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, we're offering comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE, and you'll receive continuing updates as major events unfold during the year. To get started, click here now.

The article GE Wraps Up a Solid 2012 originally appeared on Fool.com.

Isaac Pino, CPA, owns shares of General Electric. The Motley Fool recommends Google and owns shares of General Electric and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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