General Electric Co. GE released its third-quarter financial results before the market opened on Oct. 30. The U.S. multinational conglomerate registered better-than-expected earnings and revenue. While the company witnessed growth in its aviation and health care segments, its power and GE Capital businesses suffered.
Snapshot of the quarter
The company recorded adjusted earnings of 15 cents per share, which edged past Wall Street’s expectations of 11 cents per share. Revenue totalled $23.36 billion, which was more than the anticipated $22.93 billion.
Reflecting on GE’s performance, Chairman and CEO H. Lawrence Culp Jr. said:
“Our results reflect another quarter of progress in the transformation of GE. We are encouraged by our strong backlog, organic growth, margin expansion, and positive cash trajectory amidst global macro uncertainty.”
At the end of the quarter, company had cash and cash equivalents of $76 billion. Its borrowings stood at $93.2 billion.
Segment results
The conglomerate’s aviation division recorded 8% revenue growth to $8.1 billion. GE won orders valued at $8.8 billion. While the company’s equipment orders plunged 27%, its service orders gained 15%. GE expects its cash flows in the aviation business to be adversely affected due to the grounding of the Boeing 737 Max.
In the health care arena, the company reported sales of $4.92 billion, up 4.6% on a year-over-year basis. Orders bagged during the quarter were valued at $5.1 billion, which reflected a gain of 1%. Segment profit came in at $974 million, which grew 13% thanks to higher volume and reduced cost, which was partially offset by inflation, tariffs and program investments.
In contrast, the company’s other two main divisions, namely power and GE Capital, posted losses for the quarter. The power segment's reported loss of $144 million was an improvement of 79% from the year-ago quarter. As far as the GE Capital business is concerned, the company is gradually selling off its assets (roughly $3.6 billion so far in 2019) and is poised to dispose off assets worth approximately $10 billion in 2019.
Financial forecast
For 2019, General Electric anticipates adjusted earnings to be in the range of 55 cents to 65 cents per share. The company also raised its industrial free cash flow guidance from negative to $1 billion to flat to $2 billion, despite the external headwinds from the 737 Max.
Disclosure: I do not hold any positions in the stocks mentioned.
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