For the latest quarter, GE posted revenue of $35.7-billion, down from $36.25 billion a year earlier, and net profit of $3.19 billion, down from $3.49 billion a year earlier. This means, revenues came down by about 1%, and profits came down by about 10%. On per share basis, the earning per share stands at $0.31, down from $0.33 per share during the same period last year. However, excluding the effect of acquisition, non-operating pension costs, and restructuring related costs the earning per share from continuing operations stands at $0.40 as compare $0.36 per share a year earlier.
Decline in revenue:
GE Capital as well as Power & Water segment showed the biggest decline in the revenues. The revenues declined by about 5% for GE Capital and about 7% for Power & Water segment. Oil & Gas, Aviation and Home & Business Solutions segments showed the biggest rise with about 18%, 12% and 7% raise in the revenues, respectively (see the table below).
The company showed an all around improvement in the margins. Overall segment margins, including GE Capital improved by about 1.7% (see the table below). The standalone industrial segment margins, improved by 1.2%. The most heartening factor is the improvement in the margins of its Power& Water and aviation segments as these two segments constitutes the major part of its revenues.
Change (percentage points)
Power & Water
Oil & Gas
Home & Business Solutions
Total industrial segment revenues
Total segment revenues
This margin improvement is excellent by any standards. The most heartening factor about this improvement is that this growth is sustainable.
"On margins, look, we are encouraged about our progress. GE's margins grew by 120 basis points in the quarter and were up 40 basis points year-to-date. Five of seven businesses grew margins in the quarter and all are flat or up for the year, excluding the impact of acquisitions."
"Our results are sustainable."
"So on track to achieve our 70 basis points goal."
This also means that the company is hopeful of further margin improvement in coming quarter. This is An excellent news for the investors.
The company showed a remarkable performance with over 19% growth. The company's backlog touched a record $229 billion at the end of the reported quarter, up $6 billion from the second quarter.
This growth came from all around the world. The growth for the company is coming from the multiple regions and almost all regions showed positive bookings, its growth markets were up 22%, the U.S. was up 18% and Europe up 17%.
As said by the management:
"The U.S. and Europe were both robust and seven growth regions had double-digit orders growth. These include Australia, Canada, Middle East, North Africa and Turkey, up 17%. Africa up 18%, Russia up 51%, China up 18% and ASEAN up 100%."
This type of growth signifies that the key strengths of the company such as quality, innovation, and its geographic diversity are working well for the company and the company is successfully competing with low cost manufactures around the globe.
Another key thing about the orders booked is its mix. For the quarter, the order mix is encouraging. The main segments that contribute to this order build-up include Power & Water (up 19%), Aviation (up 51%) and Transportation (up 34%). All these segments are the high margin segments with about 20% margins during the reported quarter. So, the company is booking more and more high-margin orders. This is the prime reason behind the company's confidence that it can further improve the margins, in the near future.
The company intends to return $18 billion to investors in 2013. For the quarter the company declared a dividend of $0.19 per share as compared to $0.17 per share during the same period last year, an increase of about 12%. Moreover, Year-to-date, the company has returned about $13.9 billion to investors in dividends and buyback.
"During the quarter, GE closed its acquisition of Avio Aero, an Italy-based manufacturer of aviation propulsion components and systems for civil and military aircraft. Also during the quarter, GE closed its acquisition of Lufkin Industries (NASDAQ:LUFK), a leading provider of artificial lift technologies for the oil and gas industry and a manufacturer of industrial gears. GE also officially formed a global partnership with XD Electric Group to offer high voltage transmission and distribution solutions and provide customers in China with localized grid automation equipment and services."
Results wise this may not be the best quarter for the company but performance wise this is among the best quarters for the company in the recent past. The company showed remarked improvement in margins and is hopeful for the further improvement in the future. The high margin segments increase their share in the order backlog, which gives a good visibility about the near future. Geographic diversity of orders booked ones again proved that the company can compete equally well in both the price-conscious and also in the quality-conscious markets.
Despite two big acquisitions at the cost of about $8.6 billion during the quarter, the company's balance sheet remains strong, and it improves from the same quarter last year. GE capital the financial arm of the company has been becoming smaller and stronger as its assets were down 7% or $40 billion year-over-year and profits were up in the reported quarter.
The company sees the improvement in the business environment. As said by the management:
"GE had a good third quarter in an improving environment."
The future looks good, particularly the current quarter (ongoing quarter). The company looks confident about the current quarter as it expects more revenues with improved margins. The most positive thing that is expected to come out from the current quarter's results will be the performance of GE capital. As said by the management:
"GE Capital, I think you have got a lot of stuff that says we are kind of ready for a very strong fourth quarter."
All in all a good quarter, which is expected to be followed by an excellent quarter.
"Orders growth in backlog supports business expansion fourth quarter through 2014" said the management.
Things are going well for the company under the improving business environment. Investors should be happy about the results. For some, the biggest worry about the company's future is its financial arm GE Capital. The latest results showed that GE Capital is becoming leaner and returning cash to the company. Further, the innovative approach of the company to use the new-age cutting-edge technologies in its products, which I explained in my last article on GE, will fuel the long-term margin enhancement and will become more and more effective with the rising backlog. So, for the time-being everything is moving in the positive direction so is its share prices.
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