10-QPeriod: Q3 FY2016

GENERAL ELECTRIC CO Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 2, 2016For Securities:GE

Summary

General Electric (GE) reported its third-quarter 2016 results, showcasing continued progress in its strategic transformation, particularly with the GE Capital Exit Plan. The company's industrial businesses demonstrated resilience, with revenue growth in key segments like Power and Aviation. Significant strategic moves during the quarter included the announcement of the combination of GE's Oil & Gas business with Baker Hughes and the acquisition of LM Wind Power, signaling a continued focus on industrial growth and digital transformation. The financial services segment, GE Capital, continued its planned reduction, significantly decreasing its total assets and moving closer to completing its exit plan. This strategic divestment is a major focus for investors, aiming to streamline the business and improve financial flexibility. While the industrial segments showed positive top-line performance, the overall company performance was influenced by ongoing restructuring charges and the impact of the Alstom acquisition, which is still being integrated. Investors should monitor the successful execution of the Baker Hughes transaction and the ongoing integration of Alstom for future performance.

Financial Highlights

45 data points
Beta

Revenue

$29.27B

21.8% Gross Margin

Net Income

$2.03B

6.9% Net Margin

EPS (Diluted)

$1.76

Total Assets

$387.69B

Free Cash Flow

-$1.09B

Financial Statements
Beta
Revenue$29.27B
Cost of Revenue$15.26B
Gross Profit$6.39B
SG&A Expenses$4.34B
Operating Expenses$27.19B
Operating Income$5.64B
Net Income$2.03B
EPS (Basic)$1.76
EPS (Diluted)$1.76
Shares Outstanding (Basic)1.11B
Shares Outstanding (Diluted)1.13B

Key Highlights

  • 1Consolidated revenues increased by 4% to $29.3 billion, driven by a 5% increase in industrial revenues, largely due to the Alstom acquisition.
  • 2GE Capital's total assets significantly decreased by 59% from $501 billion at the end of 2014 to $203 billion as of September 30, 2016, as the GE Capital Exit Plan progresses.
  • 3The company announced a major strategic move to combine its Oil & Gas business with Baker Hughes, creating a new industry leader.
  • 4Acquisitions in the digital and additive manufacturing space, including Meridium Inc. and the planned acquisition of Arcam AB and Concept Laser, highlight GE's focus on digital industrial capabilities.
  • 5GE returned $24.5 billion to shareholders in the first nine months of 2016 through buybacks and dividends, demonstrating a commitment to capital return.
  • 6Despite revenue growth in Power and Aviation, segment profit for the total industrial segment decreased by 5% due to lower earnings in Oil & Gas and Energy Connections & Lighting.
  • 7The company received approval to rescind GE Capital's designation as a nonbank Systemically Important Financial Institution (SIFI), reducing regulatory oversight.

Frequently Asked Questions

GE's financial health is in transition. The industrial segments are showing revenue growth, particularly in Aviation and Power, driven by acquisitions and organic demand. However, the Oil & Gas segment is experiencing declines due to market conditions. The significant reduction in GE Capital's assets reflects progress on the strategic exit plan, which is a key focus for improving the company's structure and financial flexibility.

GE is actively transforming its business portfolio. Key initiatives include the planned combination of its Oil & Gas business with Baker Hughes, the acquisition of companies in the digital and 3D printing sectors (like Meridium, Arcam AB, Concept Laser) to bolster its digital industrial strategy, and the ongoing divestment of non-core GE Capital assets as part of its Exit Plan. These moves signal a strong focus on industrial growth and digital innovation.

The GE Capital Exit Plan is significantly reducing the financial services segment's asset base and operational footprint. This is leading to a substantial decrease in GE Capital's total assets. While this plan is progressing well, it has also resulted in substantial charges and is a major factor in the company's financial reporting, with a goal to largely complete the plan by the end of 2016.

The industrial segments showed mixed performance. Power and Aviation experienced revenue and profit growth, benefiting from acquisitions (like Alstom) and increased demand. However, Oil & Gas faced headwinds due to challenging market conditions, leading to revenue and profit declines. Renewable Energy saw strong revenue growth, while Transportation and Energy Connections & Lighting experienced revenue decreases, partly due to dispositions.