General Electric (GE) posted strong second-quarter results Friday. Adjusted revenue advanced 7% in the period, while operating profit burgeoned 18% from last year’s quarter. The conglomerate experienced particular earnings strength from recovering GE Capital and its transportation segment, while its energy infrastructure and home and business solutions segments lagged behind considerably. Importantly, the company noted that infrastructure orders were up 24%, with equipment and services orders increasing 33% and 16%, respectively -- backlog reached a new all-time high of $189 billion at the end of the quarter (it had been $177 billion in the first quarter).

GE indicated that industrial earnings should improve in the second half of this year, with expectations for the cycle to accelerate in 2012. We tend to agree with this forecast as the firm’s presence in aerospace will see significant momentum in coming periods, as both Boeing (BA) and Airbus (EADSY.PK) ramp up deliveries. Further, the firm’s LEAP-X engine (CFM) is doing quite well as a powerplant for Airbus A320neo and is positioned as the sole source supplier on Boeing’s 737 re-engine platform. However, we do not think this is a particular negative for United Technologies’ (UTX) Pratt & Whitney geared turbofan, as deliveries of the re-engined planes won’t begin until sometime toward the middle of this decade (and both engine makers should secure nice growth). 

In all, GE’s earnings outlook remains strong, led by improving performance at GE Capital (lower losses, new deal margins, stabilization in commercial real estate) and strong orders across the board, with particular strength in aerospace. Management believes that it has the best portfolio and best outlook in 10 years, and we whole-heartedly agree the firm has made tremendous strides since the depths of the Great Recession. Further, the conglomerate’s second-quarter results and comments regarding orders are a notable positive for the industrials sector and the global economic environment, in general.

As it relates to valuation, we think GE looks attractive right now and would consider adding them to our Best Ideas List on any meaningful pullback. An entry point in the mid-teens is appropriate, in our opinion, offering an adequate margin of safety to account for key risks regarding domestic housing (impact on appliances), the U.S. wind market and a slow European economy.