Davis estimates that fourth-quarter revenue in the Power & Water segment will total $7.538 billion, increasing 1% from a year earlier, saying "demand for energy services is growing, but high utilization rates for US gas turbines are delaying outage cycles," which sets up a "very strong 2013/2014."
Davis continued on the long-term theme for gas, saying "current economics (let alone EPA mandates) support coal to gas switching and GE should begin to see US-based orders for new equipment starting in 2H13." Looking further ahead, "high-margin services and parts appear well positioned for a strong next few years. High utilization rates on decade-old equipment in the US will pull forward shutoff cycles by 6-12 months (of a 5-year cycle). And even older-gen equipment in Japan and Korea is being repaired, upgraded, or replaced proactively."
The icing on the cake for GE, according to Davis, is that new turbine have "longer service agreement terms, and fewer 3rd party parts offerings."
For the Aviation segment, Coe estimates that fourth-quarter revenue will come in at $5.047 billion, increasing 2.5% from a year earlier, "driven by easier commercial spares comps."
Davis estimates the unit's fourth-quarter revenue will total $5.170 billion, as "GEnx engine shipments ramp up and spares lap easier comps. We are expecting commercial spares daily order rates to be ~flat y/y and sequentially, vs down 18% in 3Q." Davis also expects "margins to be a strong 19.6% and to continue to inflect from here as Aviation begins to see positive leverage on R&D spend and company moves up the learning curve on GEnx shipments."Looking ahead, Davis expects the Aviation segment to "show solid revenue growth over the next couple of years and ~50 bps/year of operating margin expansion driven by double digit services/analytics growth, execution on new engine launches, strategic divestitures, increased value gap, and supply chain productivity improvements."
HealthcareCoe estimates that GE's Healthcare segment will deliver fourth-quarter revenue totaling $5.212 billion, growing 1% from a year earlier, saying "we model 3% organic growth - consistent with last quarter's result, driven by Life Sciences and [Ultrasound]." Davis estimates the segment's fourth quarter revenue will total $5.473 billion, increasing 6% from the fourth quarter of 2011, saying "commentary through the quarter has been encouraging." The analyst said that "margins should also begin to see benefits of restructuring. On balance, there continues to be risk here, but outlook is improving."
Oil & Gas
Coe expects the Oil & Gas segment to see a 7% year-over-year increase in fourth-quarter revenue to $4.369 billion, with growth accelerating from a 4% rate in the third quarter, "as we expect some project deferrals to shift into 4Q sales. This is also consistent with our recent Distributor survey, which showed sequential acceleration in US O&G sales volumes."
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