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General Electric Reports In line

GE

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General Electric Company (GE - Analyst Report) reported third quarter 2012 earnings from continuing operations of 36 cents per share, in line with the Zacks Consensus Estimate. However, earnings were up a robust 50% from the prior-year quarter. This was the 10th consecutive quarter of double-digit growth in operating earnings for the company. Profits were primarily driven by strong positive growth across all of GE’s Industrial segments (for the first time since the third quarter of 2005) with Energy Infrastructure, Transportation and Home & Business Solutions posting double-digit growth.

On a GAAP-basis, earnings were 33 cents a share, 8.3% below the Zacks Consensus Estimate. However, earnings were up 43% year over year on a GAAP basis.

Revenues

Revenues for the quarter came in at $36.3 billion, up 3% year over year. Unfavorable foreign currency translation impacted the top line by $1.1 billion. Industrial revenue grew 7%, while organic growth was 8%. Strong performance of the Industrial portfolio was driven by solid profits in the Energy and Transportation segments.

Orders in the Industrial segment growth market increased 4% year over year, excluding the effects of Wind and foreign currency translation. Year to date, orders were up 4% with four out of the five business divisions reporting profit. During the reported quarter, pricing on orders also inched up 0.1%.  

Infrastructure orders for the quarter were down 5% at $21.5 billion, due to a decrease in orders for wind turbines.

Revenue by Segment

During the reported quarter, Energy Infrastructure (12%) and Transportation (5%) segments posted strong revenue growth followed by Home & Business Solutions (1%). However, Aviation and Healthcare segments each posted a revenue decline of 1% for the quarter. GE Capital reported a 5% decline in revenues due to a decrease in Commercial Lending and Leasing (-9%) and consumer lending (-3%). 

Margins, Balance Sheet and Cash Flow

Operating income for the quarter grew 4% year over year while operating margin expanded 70 basis points (bps) to 11.1% as negative impact of foreign currency translation was fully offset by cost reduction measures.

Exiting the quarter, cash generated from operating activities was $10.7 billion, up 63% and cash and cash equivalents were $134 billion.

Outlook

General Electric is positive about its performance in fiscal 2012. The Industrial division is expected to continue to benefit from strong growth in the Transportation, energy and Aviation. Profits at GE Capital are expected to be driven by lower losses and real estate turnaround.

General Electric currently holds a Zacks #3 Rank, which implies a short term ‘Hold’ rating.

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