This summary is based on the third quarter fiscal 2007 earnings call conducted by General Electric Company (GE: chart) on October 12, 2007.
Chairman & Chief Executive Officer: Jeff Immelt
Chief Financial Officer: Keith Sherin
Investor Relations: Dan Janki
Key Investors Issues
- Earnings per share were 54 cent compared to 47 cents in the previous year.
- Quarterly revenue grew 12% over prior year to $42.5 billion.
- GE has repurchased $8.1 billion of stock year-to-date, with $6.3 billion in Q3.
Third Quarter Fiscal 2007 Financial Highlights
The net earnings were $5.5 billion or 54 cents per share, up 14% and 15%, respectively, from third-quarter 2006.
Third-quarter 2007 earnings from continuing operations were $5.1 billion, or 50 cents per share, up 9% and reflecting 6 cents per share of restructuring and other charges.
EPS from continuing operations were 50 cents, up 9% from last year’s 46 cents, reflecting strong double-digit earnings growth at the Infrastructure and Commercial Finance businesses and restructuring and other charges. Earnings from discontinued operations were $0.5 billion, or 4 cents per share. Effective in the third quarter 2007, discontinued operations for all periods presented include the results of WMC and the firm’s Japan personal loan business. Discontinued operations also include the results of Plastics business, which was sold in the third quarter 2007 at an after-tax gain of $1.8 billion and the Advanced Materials business, sold in the fourth quarter 2006.
Revenues from continuing operations were $42.5 billion, up 12%, increasing 8% organically.
GE achieved its eleventh straight quarter of organic revenue growth of 2-3 times global GDP. Services revenues were up 7% and global revenues grew 15%. GE’s year-to-date segment operating profit margin was up 70 bps to 15.8%.
GE industrial sales were $24.7 billion, an increase of 11% from third quarter 2006, reflecting core growth and the net effect of acquisitions. Financial services revenues grew 16% over last year to $18.1 billion, primarily reflecting core growth.
GE’s total orders were up 20% to $24 billion, and total backlog grew $19 billion year-over-year, an increase of 43%.
Major equipment orders were $12 billion, up 39%, and major equipment backlog grew to $47 billion, up 56%. Services orders were up 4%, and Customer Service Agreement (CSA) backlog stood at $96 billion, up 7%.
- Order in Aviation is up 93%. GEnx and GE90 had great order strength around the world.
- Energy more than doubled in the quarter, over $4 billion of orders driven by tremendous performance in thermal and wind.
- Oil and gas was up 56%, tremendously strong around the world.
- Transportation was down in the quarter, as major equipment orders are lumpy, but they had a one-time large order with Kazakhstan last year. They are up 27% year-to-date and the business is in great shape. Overall infrastructure orders up 62% on major equipment and it is up 38% organically. The backlog continues to grow up 56% and up $15 billion since the end of the year.
The service orders of $8.2 billion, up 4%. That is driven by aviation and oil and gas. The commercial aviation business had tremendous spares performance, about $19 million a day, up 20%.
- The energy business is down and services orders are driven by nuclear. The firm had a tough comparison. The firm had a non-repeat of a large Entergy service order last year and also it has been impacted by the timing of fuel reloads specifically, in TEPCO in Japan due to the earthquake.
The flow orders of $4 billion were up 5%. The firm had great strength in lighting and industrial. Appliances was down slightly with the growth in retail, offset by the contract channels. Overall it is a continuous strong performance of $24 billion of orders in total, up 20%; and year-to-date, $71 billion of orders, up 18%.
The margins of the firm was down slightly in Q3 but up 70 basis points year-to-date.
Healthcare and infrastructure were a drag in the quarter. Healthcare is about two-tenths of a point drag, having a high-margin business flat is a mix issue for the firm in total.
- In infrastructure both mix as GE continues to sell high quantities of equipment at greater rates than the services growth and then the acquisitions are performing well, but they are coming in at lower margin rates than the rest of the business.
The firm is getting great growth in infrastructure. However, the equipment services mix is about a four-tenths drag year-to-date. GE is delivering growth and equipment at 30% plus and the services growth at 10%, so the firm is building that installed base and that is going to be great for services as the firm goes forward. It is a slight drag on the margin rate.
In the fourth quarter, the firm is going to get 50 basis points of growth and if it looks at the drivers for the total year, the productivity is strong, price is outpacing inflation. The firm has got a benefit in NBC from the Olympics. That equipment services mix will be with the firm all year. The infrastructure acquisitions are with the firm all year and then the healthcare drag. With the 50 basis points in the fourth quarter, it will deliver the total year at 70 basis points and the firm is committed to delivering that.
