GE’s First Quarter Earnings: A strong start in a challenging environment

GE released its first-quarter results for 2017, kicking off the year with strong performance. The company said it’s on the right path to achieve its 2017 goals and deliver more value to its customers, shareowners, and employees.

GE reported industrial operating plus GE Capital verticals earnings of $0.21 per share. The company also reported industrial operating profit margin of 12.6 percent, up 130 basis points (a basis point is one-hundredth of a percent). Industrial operating profit grew 11 percent and up 20 percent organically (excluding effects from currency or mergers and acquisitions), compared to the first quarter in 2016. Orders increased 10 percent, and GE’s equipment and services backlog grew to a record $324 billion. A strong backlog shows visibility into future sales.

The company said it remains on track to deliver $1.60 – $1.70 earnings per share for the year, increasing organic revenues 3 to 5 percent. The industrial segment’s organic revenues for the quarter were strong, up 7 percent.

In February, GE Chairman and CEO Jeff Immelt published a letter to shareowners outlining the company’s transformation to serve customers around the world as a focused, “digital-industrial” company.

“Positioning GE to win has required change,” Immelt said. “We refocused the company to be in businesses where we can lead while investing in new capability to capture future growth. We want GE to be essential to our customers, investors and the world.”

The LM9000 “aeroderivative” turbine is an example of the GE Store. Developed by GE’s Oil & Gas business, it uses technology from the GE90, the world’s most powerful jet engine. Image credit: GE Oil & Gas.

GE’s investments in GE Digital are key examples of this drive for change. Earlier in the quarter, GE completed its $915 million acquisition of ServiceMax, a leading company in cloud-based field service management. With ServiceMax, GE Digital gained even more access to the $1 trillion market for industrial services. ServiceMax orders were up 70 percent in the first quarter of the year.

Since forming GE Digital in 2015, the company has brought on over 26,000 developers to code on Predix, GE’s operating system for the Industrial Internet. This quarter, the digital unit booked about $950 million in orders and created millions of dollars of productivity savings across the company. Some examples of productivity savings are streamlining workflows in field services, decreasing downtime for power turbines or using software analytics like asset performance management solutions (APM) to improve inventory turns or decrease lead time.

GE’s digital capabilities are part of the “GE Store” — the way GE businesses share talent, technology and expertise to enhance their performance and develop new technology. In January, GE Oil & Gas launched its LM9000 “aeroderivative” turbine, which uses GE Aviation’s jet engine technology from the GE90, the world’s most powerful jet engine. GE engineers were able to extend by 50 percent periods between maintenance, increase power output by 20 percent and lower NOx emissions by 40 percent, compared with other machines.

GE’s record-breaking HA-class gas turbines also benefit from the store. The world’s largest and most efficient heavy-duty gas turbines, they include technology originally developed for supersonic jet engines. Currently, GE has orders for 30 HA units in GE’s backlog — including GE’s first-ever HA order in China.

The GE Store also helped produce GE’s Evolution Series Tier 4 locomotive engine, which can save customers $1.5 billion in infrastructure costs by eliminating after-treatment waste and lowering emissions. This quarter, GE Transportation won an order for 22 Tier 4 locomotives in North America.

LM Wind Power’s wind turbine blades made from a unique blend of carbon and glass fibre and other materials are the lightest in the world. At nearly 300 feet (88.4 meters), they are also the longest. Image credit: LM Wind Power.

GE also recently completed the $1.65 billion acquisition of LM Wind Power, a Denmark-based technology developer and manufacturer of rotor blades for the wind industry. GE says the acquisition, originally announced in October, will help GE’s renewable energy business bring its onshore and offshore wind turbine customers more savings, efficiencies and performance around the world. The deal is expected to add to GE’s earnings by 2018.

At the same time, GE also continued to refocus its financial business to align closely with its industrial portfolio. In April 2015, GE announced plans to sell $200 billion in financial assets. This quarter, the company closed an additional $7 billion in asset sales, bringing its total GE Capital exit plan progress to $198 billion. Today, all major transactions for the plan are now complete.

GE is making transformative steps as a digital-industrial company, and investors should expect returns as the company positions itself for future growth in its industrial businesses, the company said. This quarter, GE returned $4.4 billion to investors through dividends and share buyback. GE expects to return between $19 billion and $21 billion in cash to investors by the end of the year.

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This article originally appeared on the U.S. edition of GE Reports.

 

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