General Electric Marginally Beats - Analyst Blog
January 18 2013 - 6:04AM
Zacks
Despite continued macroeconomic headwinds, General
Electric (GE) reported strong fourth quarter 2012 results
with operating earnings of $4.7 billion or 44 cents per share
compared to $4.1 billion or 39 cents in the year-ago quarter,
representing a year-over-year increase of 13%.
This was the eleventh consecutive quarter in which the company
witnessed double-digit growth in operating earnings. The operating
earnings for the reported quarter were marginally above the Zacks
Consensus Estimate of 43 cents.
On a GAAP basis, the company reported quarterly earnings of $4.3
billion or 41 cents per share from continuing operations compared
to $4.0 billion or 37 cents in fourth quarter 2011. For full year
2012, operating earnings were $16.1 billion or $1.52 per share
compared to $14.9 billion or $1.31 in the prior year. GAAP earnings
for 2012 were $14.7 billion or $1.39 per share from continuing
operations compared to $14.2 billion or $1.24 in 2011.
Revenues
Revenues for the quarter came in at $39.3 billion for the quarter,
reflecting a 4% rise year over year. While industrial segment
revenue grew 4%, GE Capital revenue surged 2% year over year.
Strong performance of the Industrial portfolio was driven by solid
contributions from the Oil & Gas and Aviation segments,
partially offset by Transportation segment. Revenues for the
reported quarter exceeded the Zacks Consensus Estimate of $38.4
billion.
For full year 2012, revenues were relatively flat compared to the
previous year at $147.4 billion. While industrial segment revenue
grew 8%, GE Capital revenue dipped 6% year over year. Strong
performance of the Industrial portfolio during the year was driven
by solid contributions from all the segments, particularly Energy
Management and Transportation. Revenues for full year 2012 exceeded
the Zacks Consensus Estimate of $147.0 billion.
Infrastructure orders for the reported quarter increased 2% year
over year to $28.5 billion, with ratio of equipment orders received
to orders billed (book-to-bill) being 1.2. Total backlog of
equipment and services at quarter-end reached a record level of
$210 billion. During fourth quarter 2012, General Electric received
orders from Petrobras Argentina SA (PZE) for $0.4
billion of turbomachinery.
The company also penned a $0.2 billion contract to supply
sub-sea production equipment to the Lianzi project of
Chevron Corporation (CVX) and $0.4 billion worth
of wind turbines to Renova Energia in Brazil. In addition, CFM
International procured an agreement from Alaska Airlines for 50 new
Boeing 737 aircraft engines. CFM International is a 50-50 joint
venture between Snecma S.A., a French multinational aircraft
manufacturer and subsidiary of Safran SA (SAFRY),
and GE Aviation Systems.
The company witnessed strong revenue growth during the year from
Russia, Latin America, Australia/New Zealand, China, Sub-Saharan
Africa and ASEAN countries. At the same time, the company launched
new products like FlexEfficiency™ 60, a new power plant technology
with turbines; and the Tier 4 Evolution® Series, reportedly the
most fuel-efficient freight locomotive in its history.
Revenue by Segment
General Electric reorganized its Energy Infrastructure segment into
three separate segments effective Oct 1, 2012, namely – Power &
Water, Oil & Gas, and Energy Management. Consequently, the
company presently has eight operating segments: Power & Water,
Oil & Gas, Energy Management, Aviation, Healthcare,
Transportation, Home & Business Solutions, and GE Capital.
During the reported quarter, Oil & Gas and Aviation recorded
the highest revenue growth year over year at 11% each, followed by
Power & Water, Home & Business Solutions, and GE Capital at
2% each. However, Transportation and Energy Management segments
posted a revenue decline of 7% and 1% respectively for the
quarter.
For full year 2012, the trend was slightly different with all
segments, except GE Capital reporting revenue growth.
Transportation and Energy Management segments posted a revenue
increase of 15% each for the year, followed by Oil & Gas (12%),
Power & Water (10%), Aviation (6%), Home & Business
Solutions (4%), and Healthcare (1%). GE Capital revenue dipped 6%
year over year
Margins, Balance Sheet and Cash Flow
Total operating income for the reported quarter grew 11% year over
as all the segments recorded healthy profits, the notable among
them being Energy Management (36%), Aviation (22%) and Oil &
Gas (14%). Total operating income for full year 2012 surged 11%
year over as all the segments recorded solid profits, the most
impressive among them being Energy Management (68%), Transportation
(36%), and Home & Business Solutions (31%).
Cash generated from operating activities for full year 2012 was
$17.8 billion, up 48% from the prior-year period. Cash and cash
equivalents were $77 billion at year-end 2012. The company
repurchased $2.1 billion worth of stock during the reported
quarter, bringing its tally for the year to $5.2 billion. During
2012, General Electric returned $12.4 billion to investors through
dividend payouts and buybacks. The company also raised its
quarterly dividend by 12% to 19 cents per share, the fifth such
increase in three years.
Outlook
With a healthy growth in both the top- and bottom-line, solid
operating margins, and strong order backlogs, General Electric
expects to continue its bull run in 2013 and simultaneously benefit
the shareholders with increased dividend payouts. We also remain
encouraged by the growth momentum and maintain our Neutral
recommendation on the stock, which currently has Zacks Rank #4
(Sell).
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