Despite continued macroeconomic headwinds, General
Electric Company ( GE ) reported strong
first quarter 2013 results with operating earnings of $4.1 billion
or 39 cents per share compared to $3.6 billion or 34 cents in the
year-ago quarter, representing a year-over-year increase of 15% on
a per share basis.
This was the twelfth consecutive quarter in which the company
witnessed double-digit growth in operating earnings. The operating
earnings for the reported quarter beat the Zacks Consensus Estimate
by 4 cents.
On a GAAP basis, the company reported quarterly earnings of $3.6
billion or 35 cents per share from continuing operations compared
to $3.2 billion or 30 cents in first quarter 2012.
Revenues for the reported quarter were relatively flat year over
year at $35.0 billion, primarily due to a higher-than-expected
decline in the performance of the Industrial segment in Europe,
partially offset by solid contributions from Aviation,
Transportation and Home & Business Solutions.
While Industrial segment revenue dipped 6% to $22.3 billion, GE
Capital revenue climbed 2% year over year to $11.5 billion.
Revenues for the reported quarter exceeded the Zacks Consensus
Estimate of $34.5 billion.
Infrastructure orders for the reported quarter increased 3% year
over year to $23.8 billion, with ratio of equipment orders received
to orders billed (book-to-bill) being 1.3. Total backlog of
equipment and services at quarter-end reached a record level of
$216 billion. During first quarter 2013, General Electric received
a services contract worth $620 million from QGC (Queensland Gas
Company) for its Queensland Curtis LNG plant off the east coast of
General Electric also penned a $500 million deal to provide power
equipment and long-term service for the Emirates Aluminum smelter
complex in Abu Dhabi, and extended a $333 million worth service
contract for Russia's Sakhalin-2, one of the world's largest
integrated oil and gas projects.
Revenue by Segment
During the reported quarter, Oil & Gas
revenue was flat year over year at $3.4 billion, while
Energy Management revenue increased 2% to $1.7
billion. Revenue from the Aviation segment climbed
4% year over year to $5.1 billion. However, both
Healthcare and Home & Business
Solutions segments witnessed a flat trajectory in
year-over-year revenue at $4.3 billion and $1.9 billion,
Revenue from the Transportation segment jumped
12% in the reported quarter to $1.4 billion. However, significantly
fewer wind and gas turbine shipments, particularly from the
European markets, hampered revenue of the Power &
Water segment, which decreased 26% year over year to $4.8
billion. Consequently, the overall revenue from the Industrial
segment declined 6% in first quarter 2013 to $22.7 billion compared
to year-ago period.
Revenue from the GE Capital segment rose 2% year
over year to $11.5 billion as it continued its strategy to reduce
the overall size of its portfolio while focusing on core growth.
During the reported quarter, GE Capital closed the acquisition of
the deposit base and online deposits business of MetLife,
Inc. ( MET
Margins, Balance Sheet and Cash Flow
General Electric's total operating income for the reported quarter
decreased 4% year over year, with a considerable decline in profits
in the Power & Water and Energy Management segments (down 39%
and 29% respectively). Total Industrial segment profit dipped 11%
despite a significant contribution from the Home & Business
Solutions (up 39%) and Transportation (up 15%). On a positive note,
management expects Power & Water segment to improve in the
second half of the year to report a healthy performance for full
In order to further boost its margins, General Electric continues
to implement its cost-cutting initiatives, and expects to reduce
industrial structural costs by at least $1 billion in 2013. The
company has already curtailed its industrial structural costs by
$200 million in the reported quarter. With improving profits in
Power & Water, and healthy performance in other segments,
General Electric anticipates a margin improvement of 70 basis
points in 2013.
Cash generated from operating activities for the reported quarter
was $0.2 billion due to inventory build-up for second-half volume,
tax and long-term incentive plan payouts. During first quarter
2013, General Electric sold its remaining 49% stake in the
NBCUniversal joint venture to Comcast Corporation
( CMCSA ) for
Subsequent to the quarter-end, the company also inked a
definitive agreement to acquire artificial lift technology provider
Lufkin Industries Inc. ( LUFK ) for $3.3
billion. Cash and cash equivalents at quarter-end were $90 billion.
General Electric repurchased $1.9 billion worth of stock during the
reported quarter and returned $3.9 billion to investors through
dividend payouts and buybacks.
With a focused and dedicated execution of its strategic plans,
General Electric expects to continue its bull run in 2013 and
simultaneously benefit the shareholders with a healthy return on
investments. The company has exited from the media business and has
increased its investments in core industrial businesses through
restructuring, state-of-the-art technology, and R&D
General Electric also remains focused on its stringent
cost-cutting measures. We remain encouraged with these endeavors of
the company.COMCAST CORP A (CMCSA): Free Stock Analysis
ReportGENL ELECTRIC (GE): Free Stock Analysis ReportLUFKIN INDS (LUFK): Free Stock Analysis ReportMETLIFE INC (MET): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment
General Electric presently retains a Zacks Rank #3 (Hold).