Jan. 19 (Bloomberg) -- General Electric Co.'s fourth-quarter earnings rose 12 percent, helped by lower-than-expected tax rates, demand for commercial loans and equipment for power plants.

Shares of the world's second-largest company by market value fell 2.8 percent, the biggest drop in a year, after analysts said profit may have missed their estimates without reduced tax rates. GE also restated some past results to fix derivatives accounting.

``This is now the fourth or fifth quarter in a row where we see quality-of-earnings issues,'' said Steve Hoedt, an analyst with National City Corp. in Cleveland, which owns more than 21 million shares of GE. The tax rate is ``masking a little bit of weakness in the underlying businesses.''

Profit from continuing operations rose to $6.58 billion, or 64 cents a share, from $5.87 billion, or 56 cents, a year ago, GE said in a statement today. That met the average estimate of 15 analysts compiled by Bloomberg.

The lower tax rate contributed as much as 3 cents to profit, Credit Suisse's Nicole Parent said. The reduced rates stemmed from the sale of a unit, GE said.

Revenue rose 11 percent to $44.6 billion, helped by Chief Executive Officer Jeffrey Immelt's efforts to expand sales in regions such as Asia and bolster his position in faster-growing divisions with acquisitions. Fairfield, Connecticut-based GE got almost half its sales in 2006 from abroad, which helped to blunt the effect of the slowing economy in the U.S.

Shares of GE, whose $385.1 billion market value trails only Exxon Mobil Corp., fell $1.05 to $36.95 at 4:02 p.m. in New York Stock Exchange trading. They rose 5.5 percent last month.

Plastics

Immelt, 50, confirmed GE may divest its plastics unit. Profit in the industrial business, which includes plastics, unexpectedly fell on higher materials costs in the quarter. Earnings dropped 12 percent after GE had forecast an increase of at least 5 percent.

``The negative really has been plastics, it continues to be a tough market for us,'' Immelt said on a conference call.

Total orders rose 19 percent in the quarter, and sales from groups GE has owned for more than a year grew 8 percent. Profit rose at five of the six main segments, led by large turbines and commercial finance items such as loans and real estate.

GE sold its reinsurance unit and treated it as a discontinued operation today. The company also sold its advanced materials unit. Including those results, net income more than doubled from $3.16 billion a year earlier.

The company predicted earnings this quarter of 43 cents to 45 cents a share, in line with analysts' estimates, and 2007 profit of $2.18 to $2.23.

Restatement

GE restated results for 2001 through 2005 and the first three quarters of this year after a previously disclosed Securities and Exchange Commission review into how it accounted for derivatives for interest rate swaps.

The moves added to full-year per-share profit by 1 cent, and reduced total earnings by $343 million from 2001 to 2006.

``I don't think it's a huge thing for GE,'' Peter Sorrentino of Huntington Asset Management said in an interview. GE's AAA credit rating, the highest available, wasn't affected by the restatement, Standard & Poor's said.

More than 200 companies have had to review derivatives accounting. GE restated results in May 2005 for the years 2002 through 2004, adding $381 million in profit over the period.

Today's restatement is for hedging in commercial paper, or notes due in less than nine months. A review found that accounting for the transactions didn't meet SEC accounting rules, GE said.

Months of Talks

GE has been working with the SEC since last fall on the rules and was notified Jan. 17 that changes would have to be made, Chief Financial Officer Keith Sherin said in an interview. The probe is ongoing as the SEC reviews documents and conducts interviews.

``We're committed to getting this right,'' Sherin said. ``The SEC told us to fix this, and we're fixing this. There's absolutely no change in liquidity.''

GE redesigned its rules in 2001. If GE had known exactly what the SEC wanted then, the processes wouldn't have needed to be changed, he said. The process was reviewed by internal auditors and outside auditor KPMG, which ruled GE's process was compliant.

A 5 percent note issued by GE's finance arm maturing in 2011 rose 0.11 cent to 99.91 cents on the dollar today, according to Trace, the bond price reporting system of the NASD.

The tax rates were ``surprisingly low,'' said Merrill Lynch & Co.'s John Inch. The rate in the industrial business was 15.9 percent, instead of his estimate of 22.5 percent.

Sherin didn't provide a specific forecast for the 2007 rates. GE said in December that 2007 tax rates would be about the same as 2006. GE will give a projection with its first-quarter results after completing its operating plans for the year, he said.

Tax settlements may make quarterly rates ``a little lumpier'' in 2007, and GE plans to update forecasts for the rates each quarter, he said.

Equipment, NBC

Large-equipment orders drove growth, rising 35 percent in the quarter. GE's installed base of power-plant turbines, jet engines and medical-imaging machines boosts long-term service contracts, which provide a steadier source of revenue.

NBC Universal posted its first profit increase in four quarters, gaining 5 percent. The business's flagship network, which lost ratings in 2005 when comedies ``Friends'' and ``Frasier'' ended, now is making gains with the drama ``Heroes'' and Sunday night football. NBC tied for second in the network TV sweeps in November among viewers age 18 to 49, up from fourth.

The infrastructure group's profit climbed 19 percent, helped by jet-engines and power plant turbines. Health-care unit profit rose 16 percent. Consumer finance profit gained 14 percent, and commercial finance added 18 percent.

The finance earnings rose more than banks including Citigroup Inc., which today reported a 3.2 percent increase.

`Is He Crazy?'

Immelt this month stepped up an acquisition spree to further his expansion in faster-growing markets. Through December, GE had made more than $70 billion in acquisitions since Immelt became CEO in 2001, and shed slower-growth areas such as insurance.

He plans to auction the plastics unit for about $10 billion, the company confirmed today. The business has been hurt by higher costs for benzene, a raw material derived from oil and can be run by someone ``outside the GE umbrella'' more effectively, Immelt said. He classified interest in the unit as ``substantial.''

GE yesterday agreed to buy part of the diagnostic-equipment unit of Abbott Laboratories for $8.13 billion to expand its line of testing devices. The agreement followed other January deals to buy Smiths Group Plc's aerospace unit for $4.8 billion, drilling- equipment maker Vetco Gray Inc. for $1.9 billion and a real estate property fund in Germany for $546 million.

``When you see me do $15 billion in two weeks, sometimes you say `Is he crazy?' This is all part of a five-year, long-term diligence on the company and basically on strategy to redeploy into fast growth from slow growth,'' Immelt said.

To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net.

Last Updated: January 19, 2007 16:13 EST