GE in Q3: renewables up, transport down, Europe under close watch

During a third quarter earnings call, General Electric said it sees strength in energy and aviation but hesitation in transportation and healthcare. Plus, Europe's effect on the global market.

General Electric released its third quarter earnings this morning and, during a conference call, offered further insight into its energy, aviation, transportation and health businesses.

What you need to know:

  • Renewable orders were up but revenues were down. Renewables were up by 68 percent, to $1.8 billion. Why? Increased volume. "We had orders for 781 wind turbines versus 501 last year. We had large orders in the U.S., Brazil, Romania, and Canada," CFO Keith Sherin said. "We had orders for 16 gas turbines versus 19 last year but the commitment activity that we see remains strong." Still, renewables revenue was down 6 percent, to $1.3 billion.
  • Oil and gas remain strong. Orders were up 77 percent to $3 billion; 34 percentage points were from M&A activity. "We continue to experience very strong growth organically, plus we have some growth from the recent acquisitions and some impact from the weaker dollar in the third quarter," Sherin said.
  • Transportation orders were down but volume is strong. Without large multi-year orders, total orders for the quarter were down 28 percent to $1 billion. Equipment orders were also down, by 55 percent. But mining orders were up 54 percent and service orders were up 30 percent. In all, the segment chalked up a 94 percent increase in profits, mostly owing to higher volume.
  • Healthcare growth was tepid at best. GE recorded positive growth with orders up 11 percent to $4.6 billion, but dig deeper and you'll find that China (up 27 percent), India (up 25 percent) and Latin America (up 33 percent) were offset by Europe (down 8 percent, adjusted for FX). The company also invested $30 million in new products, weighing overall profits down.
  • Aviation remains strong. Orders of $5.7 billion were up 14 percent, driven by commercial and military engine orders.

The big theme from the call? Europe's credit crisis and slowdown, which represents 18 percent of GE's industrial revenue.

Chief executive Jeff Immelt elaborated on the call, citing the healthcare market as an example:

"Europe and Japan, if you think about those two markets in the second half of this year, probably cost us about $70 million for operating profit, something like that in the second half," he said. "Just those two markets. I think Japan could get better...we are going to stay cautious on Europe."

But U.S. healthcare demand remains strong. Either way, GE's not too concerned, Immelt said.

"We're positioned to win in 2012," he said "I don't think the environment has really surprised us so much...we got the goods, I think, from a product background and from a backlog standpoint."

This post was originally published on Smartplanet.com

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