Summary
General Electric Company (GE) reported its first quarter 2016 results, highlighting significant progress on its GE Capital Exit Plan. The company substantially reduced the size of its financial services business, with assets decreasing from $501 billion at the end of 2014 to $281 billion by March 31, 2016. This strategic shift is aimed at transforming GE into a simpler, more valuable industrial-focused company. The industrial segments showed mixed performance, with revenue growth driven by acquisitions like Alstom, but also impacted by foreign currency headwinds. The company also returned substantial capital to shareholders through dividends and share repurchases.
Financial Highlights
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Financial Statements
Beta
| Revenue | $27.84B |
| Cost of Revenue | $14.59B |
| Gross Profit | $5.52B |
| SG&A Expenses | $4.61B |
| Operating Expenses | $27.61B |
| Operating Income | $248.00M |
| Net Income | $228.00M |
| EPS (Basic) | $-0.08 |
| EPS (Diluted) | $-0.08 |
| Shares Outstanding (Basic) | 1.16B |
| Shares Outstanding (Diluted) | 1.17B |
Key Highlights
- 1GE is significantly advancing its GE Capital Exit Plan, having signed agreements for $166 billion in Ending Net Investment (ENI) and closing $146 billion by March 31, 2016.
- 2Consolidated revenues increased by 6% to $27.8 billion, driven by a 7% rise in industrial revenues, largely due to acquisitions like Alstom ($2.8 billion impact).
- 3GE Capital's losses decreased by 84% primarily due to the absence of significant exit plan charges incurred in the prior year's quarter.
- 4The company returned $8.3 billion to shareholders in Q1 2016, including $6.1 billion in stock buybacks and $2.2 billion in dividends.
- 5Industrial segment revenues grew 6% to $25.9 billion, but segment profit declined 7% to $3.3 billion, impacted by lower earnings in Power, Oil & Gas, and Energy Connections, partially offset by Aviation.
- 6Foreign exchange had a significant adverse impact, particularly on industrial operating profit, which was affected by $0.3 billion due to transactional impacts related to hedging.
- 7GE filed a request with the Financial Stability Oversight Council (FSOC) to rescind GE Capital's designation as a nonbank Systemically Important Financial Institution (SIFI).
Frequently Asked Questions
GE is actively executing its GE Capital Exit Plan, announced on April 10, 2015. The goal is to significantly reduce the size of its financial services business by selling most of GE Capital's assets, allowing the company to focus on its core industrial businesses and become a simpler, more valuable entity.
The acquisition of Alstom's Thermal, Renewables, and Grid businesses, completed in November 2015, had a significant impact, contributing $2.8 billion to industrial revenues in Q1 2016. While it boosted overall revenues and supported segments like Power, Energy Connections, and Renewable Energy, it also presented complexities in purchase accounting and contributed to a decrease in industrial segment profit margins when excluding certain items.
GE Capital is undergoing a significant downsizing as part of the Exit Plan. As of March 31, 2016, its assets had been reduced by 44% since December 31, 2014. The company also filed a request with the FSOC to rescind GE Capital's designation as a nonbank Systemically Important Financial Institution (SIFI), indicating a move towards normalizing its regulatory status as its financial services footprint shrinks.
Foreign exchange had a notable adverse impact on GE's results. Consolidated revenues were affected by a stronger U.S. dollar. More significantly, industrial operating profit was negatively impacted by $0.3 billion due to transactional foreign exchange impacts, primarily related to currency hedging on open contracts.