- Third-quarter operating earnings of $3.8 billion, or 36 cents a share, matches the consensus estimate.
- Revenue of $36.3 billion misses the consensus estimate of $36.9 billion.
- Foreign exchange hurt revenue by $1.1 billion
- GE Capital pays $2.4 billion to parent company.
Updated with morning market action, as well as comments from GE CFO Keith Sherin and from Bank of America Merrill Lynch analyst Andrew Obin.
NEW YORK (
on Friday missed the consensus third-quarter revenue estimate as foreign exchange took its toll, but also reported that its financial arm paid a $2.4 dividend to the parent company.
GE reported third-quarter operating earnings of $3.8 billion, or 36 cents a share, meeting the consensus estimate among analysts polled by Thomson Reuters. Operating earnings declined from 38 cents in the second quarter, but grew from 31 cents during the third quarter of 2011.
Third-quarter revenue totaled $36.349 billion, missing the consensus estimate of $36.935 billion, as foreign exchange "negatively impacted revenues by $1.1 billion." Total revenue was down slightly from $36.501 billion the previous quarter, but up from $35.367 billion a year earlier.
GE CEO Jeff Immelt said "the overall environment remains challenging, but GE continues to execute on our growth strategy," and that the company's "industrial segments delivered another quarter of strong organic revenue growth, and we ended the quarter with a robust backlog. As expected, our margins increased 70bps over the prior year period, with margin expansion in all five Industrial segments."
GE's shares were down 2.5% in morning trading, to $22.23.
For GE's Energy Infrastructure segment, third-quarter revenue totaled $12.180 billion, increasing from $11.919 billion in the second quarter, and $10.855 billion during the third quarter of 2011. The segment's third-quarter profit was $1.695 billion, increasing from $1.755 billion the previous quarter, and $1.503 billion a year earlier.
The company said that during the third quarter, "Infrastructure orders were $21.5 billion, down 5%
year-over-year primarily driven by a decrease in orders for wind turbines. Orders were up 4% excluding the effects of Wind and FX. Year-to-date orders were up 4%, with four out of five Infrastructure businesses showing growth."
Third-quarter Aviation revenue totaled $4.781 billion, declining from $4.855 billion the previous quarter, and $4.835 billion a year earlier. Aviation profit for the third quarter was $924 million, increasing slightly from $922 million in the second quarter, and growing 7% from $862 million in the third quarter of 2011.
Healthcare revenues totaled $4.307 billion during the third quarter, declining from $4.500 billion in the second quarter, but increasing from $4.332 billion a year earlier. Profit for the Healthcare segment was in at $620 million in the third quarter, declining from $694 million in the second quarter, but increasing from $608 million in the third quarter of 2011.
Transportation revenue declined sequentially to $265 million in the third quarter, from $282 million in the second quarter, but grew 35% year-over-year, from $196 million in the third quarter of 2011.
GE Capital's third-quarter revenue totaled $36.166 billion, declining from $36.501 billion the previous quarter, but growing from $35.418 billion a year earlier. Third-quarter profit for the finance segment was $1.679 billion, declining from $1.755 billion in the second quarter, but growing from $1.519 billion in the third quarter of last year.
Following the $2.4 billion payment to the parent company, GE Capital's Tier 1 common equity ratio remained "strong at 10.2%," as of Sept 30.%. GE Capital paid a total of $5.4 billion in dividends to the parent year-to-date, through Sept. 30.
Immelt said that GE was continuing to focus on "returning cash from GE Capital to fund balanced capital allocation for our shareholders. "
The company said it returned $8.4 billion to shareholders year-to-date, including $3 billion in share buybacks, and that it "ended the quarter with $85 billion of consolidated cash and cash equivalents."
CFO Keith Sherin said during the company's conference call that third-quarter buybacks totaled "a little over $2 billion," and that "our objective is to retire the shares that we issued before the financial crisis over the next several years," including "somewhere between 125 million and 150 million sharesthis year."
Sherin also said that the company would "continue to prioritize the dividend and grow that in line with earnings."
Bank of America Merrill Lynch analyst Andrew Obin said after the earnings release that "GE operating results were broadly in line with our forecast,
although industrial operating results represented a slight shortfall to our forecast," and that the GE Capital dividend paid to the parent "was ahead ofour forecast of $2.0bn."
Obin added that "GE's ability to extract more capital out of GECC ahead of the Street's expectations will be one of the key drivers of the stock in 2013."
The analyst rates General Electric a "Buy," with a $25 price target, and estimates that GE will earn $1.76 a share in 2013, increasing from his 2012 EPS estimate of $1.56. Obin said that "over the last two decades GE's stock performance has closely tracked the company's ROE." He estimates the company's return on equity for 2013 will be 13.5%.
GE's shares closed at $22.81 Thursday, returning 31% year-to-date, following a 1% return during 2011.
The shares trade for 13 times the consensus 2013 EPS estimate of $1.74.
Based on a 17-cent quarterly payout, the shares have a dividend yield of 2.98%.
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Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.