General Electric
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GE Quarterly Report Focuses on Industrial Growth

Oct. 16, 2015
While General Electric's overall earnings dropped significantly (down 29.1% from 2014), operating earnings from industrial businesses actually increased 4.5% with gains in five sectors, including power and water, and aviation.

A little more than two weeks after the company further outlined its industrial future, General Electric released a quarterly earnings report Friday morning strong enough to buoy the stock markets.

Earnings dropped significantly, down 29.1% from this time last year to a net income of $2.5 billion, with revenues dropping 1.3% to $31.7 billion. Those numbers shouldn’t be surprising, though, given GE’s massive effort to sell off numerous divisions, most notably its finance arm. The company’s operating earnings from industrial businesses actually increased 4.5% with gains in five sectors, including power and water, and aviation. (Oil and gas profits did drop 11.5%, in large thanks to lower commodity prices in the petroleum industry.)

“GE is executing and is on track to deliver on its 2015 goals,” chairman and CEO Jeff Immelt said in a statement. “Our portfolio transformation is happening at an unprecedented pace. We have a focused infrastructure business with leading capabilities in our markets. We are growing operating and gross profit margins, executing our cost-out initiatives, and making corporate smaller.

“We are transforming GE into the world’s premier digital industrial company, in a unique position to drive outcomes for customers and grow margins.”

GE reported 29 cents per share in operating earnings, with industrial revenues on an organic basis increasing 4%. It also reported $27.9 billion in revenues from its industrial businesses and verticals, and $6.5 billion in cash from operating activities.

GE continued its massive assets sale earlier this week thanks to a $32 billion deal with Wells Fargo. The company sold its GE Capital division’s commercial lending and leasing businesses in “our largest transaction to date and a critical step in our efforts to reduce the size of GE Capital,” GE Capital chairman and CEO Keith Sherin said.

The quarterly report helped GE stock and the rest of the market, too. GE jumped about 2.2% in early-morning trading, with the Dow Jones Industrial Average up another 0.17% and 29 points after Thursday’s 217-point gain. The Standard & Poor’s 500 was up 0.22% and 4.43 points, and the Nasdaq was up 0.11% and 5.29 points.

At the GE Minds + Machines event, which focused on the industrial Internet, Immelt said, “We totally believe in the transformation of a digital industry, that this will be the next wave of productivity. We need to be at the lead, and we need to provide systems inside for companies and customers. We can only do that if we become faster and more focused on customer outcomes. This really is what our company is all about. As an industrial company, it’s our turn.

“Technology has created value for tech companies. The consumers have been the beneficiaries of the Internet age. As an industrial company, we averaged 4% productivity from 1990 to 2010, but from 2011 to 2015, the productivity of industrial companies has gone up 1%. So the opportunity for industrial companies is to grab this next age of productivity. It’s created connectivity, but it hasn’t created much value.”

At that time, Immelt said the company’s goal is to be a $15 billion software company by 2020.

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