General Electric Co (NYSE:GE) Owner Earnings per Share (TTM)

General Electric Co Owner Earnings per Share (TTM) Calculation

In 1986 Berkshire Hathaway Shareholder Letter, Warren Buffett defined owner earnings as follows:

"These represent (a) reported earnings plus (b) depreciation, depletion, amortization, and certain other non-cash charges...less (c) the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long-term competitive position and its unit volume. (If the business requires additional working capital to maintain its competitive position and unit volume, the increment also should be included in (c))...Our owner-earnings equation does not yield the deceptively precise figures provided by GAAP, since (c) must be a guess - and one sometimes very difficult to make. Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes - both for investors in buying stocks and for managers in buying entire businesses...All of this points up the absurdity of the 'cash flow' numbers that are often set forth in Wall Street reports. These numbers routinely include (a) plus (b) - but do not subtract (c)."

To make it simple, then you will have:

Owner Earnings per Share (TTM) = (Net Income + Depreciation, Depletion and Amortization + Change In Deferred Tax - 5Y Average of Maintenance Capital Expenditure + Change In Working Capital) / Shares Outstanding (Diluted Average)

General Electric Co's Owner Earnings per Share (TTM) Calculation:

1. Start with "Net Income" from income statement. General Electric Co's Net Income for the trailing twelve months (TTM) ended in Mar. 2023 was $1,267 Mil.

2. "Depreciation, Depletion and Amortization" is from cashflow statement. General Electric Co's Depreciation, Depletion and Amortization for the trailing twelve months (TTM) ended in Mar. 2023 was $2,219 Mil. This needs to be added back because company does not actually need to pay cash for it. It is a non-cash item.

3. Other non-cash charges usually include "Stock Based Compensation" and "Change In Deferred Tax":
However, to be conservative, GuruFocus will not add Stock Based Compensation back to net income. General Electric Co's Change In Deferred Tax for the trailing twelve months (TTM) ended in Mar. 2023 was $447 Mil.

4. Average maintenance capital expenditure over a business/industry cycle: 5-Year Average Maintenance Capital Expenditure = $1,834 Mil

It is usually best to take a long-term average of maintenance capital expenditure. Ideally this would be as long as 10 years and include at least one economic downturn. However, since many companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year maintenance capital expenditure.

The following shows how to get maintenance capital expenditure.

First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.
Growth Capital Expenditure = Percentage of Property, Plant and Equipment as of corresponding Revenue * Revenue Increase
Third, calculate Capital Expenditure (positive) - Growth Capital Expenditure.
If [Capital Expenditure (positive) - Growth Capital Expenditure] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - Growth Capital Expenditure] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - Growth Capital Expenditure.
Fourth, get the average of the 5 years maintenance capital expenditure.

General Electric Co's 5-Year Average Maintenance Capital Expenditure = $1,834 Mil

5. "Change In Working Capital" is from cashflow statement. General Electric Co's Change In Working Capital for the trailing twelve months (TTM) ended in Mar. 2023 was $2,385 Mil.
Note: GuruFocus' Change in Working Capital is provided by Morningstar. It is calculated by adding the items under "Change in operating assets and liabilities" (may refer to a different name for different company) section in Cash Flow Statement from original financial report. And sometimes it includes non-current parts of assets and liabilities.

6. General Electric Co's Shares Outstanding (Diluted Average) for the months ended in Mar. 2023 was 1089.11 Mil.

General Electric Co's Onwer Earnings Per Share for Mar. 2023 is calculated as:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

Be Aware

Assumption: Companies usually do not report maintenance capital expenditures and growth capital expenditures separately. Here we use estimated numbers and average them over 5 years. The method to estimate maintenance capital expenditures can be found in above part 4.

Note: GuruFocus' Change In Working Capital is provided by Morningstar. It is calculated by adding the items under "Change in operating assets and liabilities" (may refer to a different name for different company) section in Cash Flow Statement from original financial report. And it includes non-current parts of assets and liabilities.

General Electric Co Owner Earnings per Share (TTM) Related Terms

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General Electric Co (NYSE:GE) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Industrial Products » General Electric Co (NYSE:GE) » Definitions » Owner Earnings per Share (TTM)

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Traded in Other Exchanges

GE:Mexico GEC:UK GNE:France GCP:Germany GE:Chile GE:Switzerland GEOO34:Brazil GE:Argentina

Address

5 Necco Street, Boston, MA, USA, 02210

Website

https://www.ge.com

GE was formed through the combination of two companies in 1892, including one with historical ties to American inventor Thomas Edison. Today, GE is a global leader in air travel, precision health, and in the energy transition. The company is known for its differentiated technology and its massive industrial installed base of equipment sprawled throughout the world. That installed base most notably includes aerospace engines, gas and steam turbines, onshore and offshore wind turbines, as well as medical diagnostic and mobile equipment. GE earns most of its profits on the service revenue of that equipment, which is generally higher-margin. The company is led by former Danaher alum Larry Culp who is leading a multi-year turnaround of the storied conglomerate based on Lean principles.

Executives

Thomas W Horton	director	4333 AMON CARTER BLVD., FORTH WORTH TX 76155
Isabella D Goren	director	C/O LYONDELLBASELL INDUSTRIES N V, DELFTSEPLEIN 27E, ROTTERDAM P7 3013AA
Francisco Dsouza	director	500 GLENPOINTE CENTRE W, TEANECK NJ 07666
Risa J Lavizzo-mourey	director	GENERAL ELECTRIC COMPANY, 5 NECCO STREET, BOSTON MA 02210
Paula Rosput Reynolds	director	605 HILLSIDE DRIVE EAST, SEATTLE WA 98112
Catherine A Lesjak	director	1501 PAGE MILL RD, PALO ALTO CA 94304
Leslie Seidman	director	7 WORLD TRADE CENTER, 250 GREENWICH STREET, NEW YORK NY 10007
Sebastien Bazin	director	5 NECCO STREET, 5 NECCO STREET, BOSTON MA 02210
Stephen F Angel	director	39 OLD RIDGEBURY ROAD, DANBURY CT 06810-5113
Tomislav Mihaljevic	director	5 NECCO ST, BOSTON MA 02210
Happe Carolina Dybeck	officer: Senior Vice President	5 NECCO STREET, BOSTON MA 02210
John S. Slattery	officer: Senior Vice President	5 NECCO STREET, BOSTON MA 02210
Peter J Arduini	officer: Senior Vice President	311 ENTERPRISE DRIVE, PLAINSBORO NJ 08536
L Kevin Cox	officer: Senior Vice President	THE PEPSI BOTTLING GROUP, INC., ONE PEPSI WAY, SOMERS NY 10589
Thomas S Timko	officer: Vice President	300 RENAISSANCE CENTER, M/C: 482-C25-A36, DETROIT MI 48265-3000