LONDON, UK / ACCESSWIRE / October 31, 2016 / Active Wall St. announces its post-earnings coverage on General Electric Co. (NYSE: GE). The company reported its financial results for the third quarter fiscal 2016 (Q3 FY16) on October 21, 2016. The industrial giant posted mixed results as its oil and gas business continued to weigh on revenue growth, while it announced that it would increase its stock-buyback program by $4 billion. Register with us now for your free membership at: http://www.activewallst.com/register/.
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Earnings Reviewed
During the quarter ended on September 30, 2016, GE reported a profit of $2.03 billion, or $0.22 per share after the payout of preferred dividends compared to $2.51 billion, or $0.25 per share, in the year ago period. On an adjusted basis, the company earned $0.32 per share compared to $0.29 per share in Q3 2015; outperforming analysts’ estimate of $0.30 per share.
The company’s revenue rose 4.4% to $29.27 billion, while Wall Street had expected $29.64 billion. Industrial revenues were up 5% to $26.7 billion. Alstom’s revenue in Q3 2016 was $3.2 billion. GE generated $18.3 billion of cash from operating activities (CFOA) year-to-date, up from $6.5 billion last year, driven by increased dividends from GE Capital.
Excluding deal taxes, Industrial CFOA was $3.4 billion year-to-date, down 45%. Orders were $26.9 billion, down 6%. Alstom’s orders were $5.2 billion, and backlog is up $3.2 billion since the acquisition. GE ended the quarter with $319 billion of backlog.
Segment Results
During Q3 2016, GE’s Power segment orders totaled $7.5 billion, up 56%, including Alstom. Core equipment orders were flat at $1.7 billion. Gas Power System orders were higher by 6%, driven by aero and gas turbines, offset partially by Distributed Power resets. The company booked 36 aeroderivative units in Q3 2016 versus 26 last year on strong demand in sub-Saharan Africa and Argentina.
For the segment’s Core equipment, backlog grew 34% versus last year. Core service orders of $3 billion were lower by 4% on lower Power Services. Advanced Gas Path (AGP) orders in Q3 2016 were 24 versus 22 last year. Equipment orders totaled $2 billion, including $1.1 billion for the Hinkley Point UK power project. Alstom’s backlog ended Q3 2016 at $17.7 billion, which is up 15% since the acquisition, with equipment up 49% and services down slightly.
Power revenue in the quarter totaled $6.5 billion, up 37% on a y-o-y basis. Core GE revenue of $5.1 billion was higher by 7%. Core equipment revenue of $2 billion, grew 15% driven by Gas Power Systems which came in higher by 16%. Aero units were higher by 9% versus last year. Core services revenues of $3.1 billion grew 2% on outage, volume, and upgrades. Alstom’s revenue in Q3 2016 totaled $1.5 billion, with $530 million of equipment and $920 million of service revenues.
During Q3 2016, Orders in GE’s renewables segment totaled $3 billion, up 59%; over 90% of the new unit orders were large, new machines. Alstom’s orders in the quarter totaled $1 billion, driven by a large offshore wind win in Germany of over $600 million and $400 million of hydro orders. Backlog at the quarter’s end was $12.9 billion. Revenues were $2.8 billion, growing 66% with core GE revenues of $2.4 billion, which was higher by 43%.
Orders in the company’s Aviation segment were $6.2 billion, down 6%. Equipment orders of $2.1 billion were down 27% on lower commercial engine orders, impacted by 9X, GE90, and GEnx. During the quarter, the company booked $1.4 billion of new engine orders. Military equipment orders of $204 million were up sharply, driven principally by T700 orders from Turkey. Total equipment backlog of $33.7 billion was down 4%. Service orders grew 10% with commercial service orders up 13%, driven by CSAs up strongly at 29%, overhaul up 9%, and the spares order rate up 6% at $42 million a day. Total service backlog grew 15% to $122 billion.
Revenues for the segment were $6.3 billion for Q3 2016, up 5%. Equipment revenue was down 3%, with commercial up 5% on higher deliveries, while military equipment revenue was down 33% on lower shipments. Service revenues were higher by 12%.
For the Oil & Gas division orders for oil declined 21% to $2.5 billion, with equipment down 22% and services down 21%. All segments saw equipment declines except Subsea and Drilling, which was up 33% on easier comparisons to last year.
GE’s Healthcare business orders in the quarter grew 6% to $4.8 billion. The segment grew organically 5% in the US, 6% in European, and 10% in Asia/Pacific. China orders were up 2%; however when excluding the KUBio bioprocess facility order the company took last year, orders in China grew 13%.
Cash Matters
GE ended the quarter with $103 billion of ending net investment excluding liquidity, with continuing ENI of $79 billion. Liquidity at the end Q3 2016 was $57 billion. During the reported quarter, the company closed $16 billion of transactions; bringing the total closed transactions through the end of Q3 2016 to $173 billion Year-to-date free cash flow was $17.3 billion. GE Capital paid $5 billion of dividends during Q3 2016. In October, GE Capital paid an additional $2 billion, and the company expects an incremental $2 billion dividend before the end of the year for a total of $20 billion in 2016 versus the $18 billion target.
Year-to date, the company has returned $24.6 billion to investors through dividends and buyback. For FY16, GE increased the buyback by $4 billion, from $18 billion to $22 billion, and total cash returned to investors is expected to be at least $30 billion for the year.
Outlook
GE narrowed its earnings guidance to $1.48 per share to $1.52 per share from the previous range of $1.45 per share to $1.55 per share. The company also cut its outlook for organic sales growth, projecting the figure would be flat to up 2% for FY16, from the prior forecast of up to 4%.
Stock Performance
General Electric’s share price finished yesterday’s trading session at $29.22, advancing 2.06% , amid heightened speculation of a proposed deal with Baker Hughes Inc. (NYSE: BHI). A total volume of 67.43 million shares exchanged hands, which was higher than the 3 months average volume of 29.81 million shares. The stock has advanced 2.70% in the last twelve months. The stock is trading at a PE ratio of 28.73 and has a dividend yield of 3.15%. Shares of the company currently have a market cap of $259.85 billion.
KEY EVENT: On October 31st, 2016, GE and Baker Hughes will host an Investor webcast at 8:30 am ET.
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