This summary is based on the second quarter fiscal 2008 earnings call conducted by General Electric Co. (GE) on July 11, 2008.
Management:
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Vice President, Investor Communications: Dan Janki
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Chairman of the Board, Chief Executive Officer: Jeffrey R. Immelt
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Vice Chairman of the Company, Chief Financial Officer: Keith S. Sherin
Key Investors Issues
- Revenues grew 11% to $46.9 billion from $42.4 billion in 2007.
- Earnings of $5.07 billion or 54 cents, were down 6% from $5.38 billion or 55 cents a share in the prior year.
- Total Company orders were $26.9 billion, up 8%.
Half Year Highlights:
- Revenues grew 9% to $89.2 billion from $81.6 billion in the prior year.
- Earnings dropped 6% to $9.3 billion or 98 cents a share.
- Stock repurchase totaled $2.5 billion.
Second Quarter Highlights
The firm had $13.7 billion of orders, up 4% as transportation had a $1.5 billion order last year that did not repeat but their outlook for additional equipment orders is very good.
- The orders grew by 30% more than the shipments as the firm continues to build backlog.
- In infrastructure alone, the backlog now is over $50 billion, up 29% just from the start of the year.
- Service orders were $9.5 billion, up 19%, aviation was up 14% and the commercial spares rate was 18.6 a day, $18.6 million a day versus 18.4, up 1%.
- The overhaul was up 31%, military services were up 24%, energy service orders were up 19%, and that bodes well for the future and it also reflects the installed base that was built.
Organically, appliances had a tough market, retail was down 7%, contract was down 15% reflecting housing, and enterprise solutions was up 1%.
- Top line revenues of $46.9 billion, was up 11% from $42.4 billion in 2007, driven by the industrial sales, which were up 15%.
- Earnings of $5.07 billion or 54 cents, were down 6% from $5.38 billion or 55 cents a share in the prior year on higher expenses, up 15%.
- GE cash flow year-to-date is $9.3 billion, down 20%.
– The firm sold 9% of Penske and is down to 51% ownership in commercial finance to Penske and that was $93 million in commercial finance.
It formed a JV in Water with Pentair in a very strategic transaction, resulting in a gain of $52 million.
- The firm continues to work on the cost structure of the company, taking out costs in C&I and commercial finance and infrastructure.
- In industrial businesses, infrastructure revenues of $17.6 billion were up 26%, with profits of $3.2 billion, up 24%.
- In aviation, revenue was up 21%, with segment profit up 10% on total orders of $5.4 billion,up 21%.
- Commercial engines of $1.6 million were down 8% and military engine orders were up 62%, driven by some Navy F18 orders.
- The firm shipped 59 more commercial engines than the prior year.
In energy, revenues were up 35%, segment profit was up 37%, with total orders of $8.9 billion,up 36%.
- Major equipment orders were up 47%, with $3.2 billion of thermal orders, up 39%.
- Wind orders were strong at $1.3 billion, up 58% and the backlog now at wind is $14.5 billion.
- Service orders were up 19% to $3.2 billion and revenues at $7 billion were up 35%.
- Oil and gas had a great quarter with strong productivity and synergies from Vetco, while transportation had a strong quarter, driven by international and mining equipment, and the asset quality in the verticals continues to be solid.
Healthcare revenues of $4.5 billion, were up 11%, with segment profit of $747 million, up 8%.
- Orders were up 10% and the diagnostic imaging orders were up 8%.
- The firm shipped 700 units out of OEC, and remains on track for 1,200 unit shipments in the second half, about 600 each in the third and fourth quarters.
- The strength to healthcare continues to be global, with DI International up 24%, life sciences international up 31%, and services revenues were strong globally, up 11%.
- In the Senate; the Medicare bill passed without any imaging cuts and overall good results in a challenging U.S. environment, driven by continued strong global growth.
The firm did a lot of restructuring in C&I, announcing 16 plant closures and 3,600 employee headcount reductions, but still operating profit was down 30% and C&I is down 55%.
- It was partially offset by enterprise solutions up 20%, so the firm is operating in a tough U.S. environment driven by the consumer and is getting some benefits of the stronger global growth.
- NBC delivered its seventh quarter in a row of positive earnings growth at $3.9 billion, up 7% and segment profit of $900 million, up 1%.
- The TV studio had another positive quarter, based on hits like The Office and House.
- News remained number one in the quarter and while prime ratings were down about 10%, the overall trade-off on lower cost of programming was positive partially offset by the continued softness in local, which was down about $40 million.
