General Electric Company (GE) released its earnings results for third quarter of 2010 before the opening bell today, reporting earnings per share of 29 cents, beating the Zacks Consensus estimate of 27 cents. With a 32% year over year increase in its earnings, the company benefited from a continued improvement in its economic scenario.
Revenue
Though the company delivered a strong bottom-line result, the top-line figure declined by 5% to $35.9 billion, below Zacks Consensus estimate $37.7 billion. The company’s total revenue in the quarter continued to be negatively affected by weak equipment sales and reduction in GE Capital assets.
The quarter recorded growth in orders for equipments and also services, first time in eight quarters. Orders for equipments increased by 9%, including a 33% rise in Technology Infrastructure. The company received orders for 60 GE90 aircraft engines from Emirates, 142 Evolution Series locomotives for the North American market, and seven gas and two steam turbines for power supply from Saudi Electric Company.
In China and India, orders for Health Care products increased by 20%. Total Backlog of the company was flat at $172 million.
Segment Details
Energy Infrastructure revenue for the quarter decreased by 14% year over year to $8.4 billion. Technology Infrastructure revenue was $9.2 billion, down 1%. Revenues at NBC Universal remained flat at $4.1 billion, however the segment operating profit was down 15%.
GE Capital revenue declined by 3% to $11.6 billion, while Home & Business Solutions revenue contracted by 1% to 2.1 billion. The company noted, strong performance in Consumer and Commercial Lending and Leasing has led to an improvement in most of GE Capital portfolios.
Income
Total segment profit was $4.7 billion, an increase of 11% year over year. Net Income from continuing operations was $3.2 billion, an increase of 29%.
Balance Sheet
The company continues to maintain a strong cash position. Cash and marketable securities stood at $124.1 billion with shareowner’s equity at $115.5 billion. Borrowings and bank deposits amounted to $494.8 billion at the end of the quarter.
Outlook
The company expects its Industrial revenues in fourth quarter 2010 to expand sequentially and be flat in comparison with fourth quarter of 2009.
General Electric has one of the best infrastructure franchises worldwide with solid organic growth rates, exposure to favorable secular trends and a large installed base supporting a growing annuity-like service business.
Infrastructure businesses from GE provide products and services that help developing regions participate in the global economy while also helping developed regions upgrade with cleaner, more efficient and better infrastructure technologies. The financial business at GE offers an array of products and services aimed at enabling commercial businesses, consumers, and markets worldwide to build a stronger, financially secure future.
The company has adopted strategic imperatives to strengthen its portfolio by building strong growth platforms and generating cash from low-return businesses. Its focus remains on accelerating organic growth and achieving technical and service excellence, and building enduring customer relationships around the world.
However, the company faces significant headwinds, including reduced infrastructure spending globally, ongoing regulatory-driven challenges in the healthcare market, reduced advertising spending and increasing delinquencies and default rates in the financial businesses. Further, the company’s global growth is subject to economic and political risks pertaining to various operating geographies. Major competitors of General Electric are Koninklijke Philips Electronics NV (PHG) and Siemens AG (SI).
General Electric Company is a global infrastructure, finance and media company taking on the world’s toughest challenges. From everyday light bulbs to fuel cell technology, to cleaner, more efficient jet engines, GE has continually shaped the world with groundbreaking innovations for over 130 years.
With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products, it serves customers in more than 100 countries and employ more than 300,000 people worldwide.
We currently maintain our Neutral rating on General Electric, with a Zacks #3 Rank over the next one to three months.
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