General Electric Q3 Earnings a Mixed Bag Against a Positive Backdrop
A transitory General Electric Company (GE) posted mixed third-quarter results on Friday, though when all was said and done, investors saw the glass as half-full.
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General Electric, which has made efforts over the past few quarters to scale back on its exposure to financial services and beef up its relative exposure to more industrial products like heavy machinery and aviation parts, looks like it's made a smart decision -- its industrial division saw operating profits rise 5% during the company's recently-completed quarter.
It wasn't enough to drive overall top-line and bottom-line improvements, though. Revenue of $31.7 billion (or adjusted revenue of $27.9 billion) was down just a bit from the year-ago comparable quarter's total, while earnings per share of GE fell from 35 cents to an operating profit of 29 cents.
Still, while total GAAP revenue missed estimates of $28.6 billion, per-share profits topped expectations of 26 cents.
Its aviation segment was particularly strong, driving a 5% increase in year-over-year revenue. Transportation equipment sales grew 3%, while its appliance division saw 8% revenue growth.
Not surprisingly, however, its oil and gas businesses struggled, logging a 16% decline in sales.
While General Electric has already taken significant steps to get out of lucrative but erratic financial-oriented ventures, more of that same effort is on the way. GE officially sold $30 billion worth of its lending business to Wells Fargo in early October, after the quarter ended, as part of a bigger plan to shed a total of $200 billion in financial services ventures. To date, it's now sold $126 billion worth of those assets, with most of the proceeds going right back to GE shareholders one way or another.
Underscoring the idea that a renewed focus on industrial goods: General Electric now has a total backlog of $270 billion, up 5% from year-ago levels. Just a little less than $200 billion of that backlog is services work, while the remaining $70 billion is in equipment and machinery orders.
In light of the Q3 earnings beat, GE is now projected to earn $1.33 per share in 2015, down from last year's profit of $1.65 per share against a backdrop of a 16.5% decline in full-year revenue. The vast majority of that weakness, however, is attributable to the exit of several divisions... mostly financial services. Next year after the divestitures are in the rear-view mirror, earnings are expected to grow to $1.53 per share on a 4.1% improvement in sales.