Key Takeaways From General Electric's 4th-Quarter Results
General Electric Co. (NYSE:GE) released its fourth-quarter results on Jan. 29 after the market opened. The U.S.-based multinational conglomerate registered better-than-expected earnings and revenue. While the company witnessed growth in the aviation sector, its power business suffered.
Snapshot of the quarter
The company recorded earnings of 21 cents per share for the quarter, which surpassed Wall Street's expectations of 18 cents per share. Revenue amounted to $26.24 billion, which was more than the anticipated $25.57 billion. Chairman and CEO H. Lawrence Culp Jr. said:
"The fourth quarter marked a strong close to the year for GE......Our priorities looking forward are clear. We are solidifying our financial position, continuing to strengthen our businesses as improvement efforts build momentum, and driving long-term profitable growth. We remain committed to creating value as we continue our multi-year transformation."
Organic orders dipped 3% in the quarter. Potential revenue arising from backlog totalled $405 billion at quarter-end, up 15% year-over-year.
Segment details
The conglomerate's aviation division recorded 6% revenue growth to $8.9 billion in the fourth quarter. While the company's equipment orders gained 37%, service orders climbed 12%. Despite the external headwinds from the 737 Max, the segment profit came in at $6.8 billion in 2019, which exceeded the $6.5 billion profit made in 2018. The company beneffited largely from robust sales of Leap engines for Boeing (NYSE:BA) and Airbus (NYSE:AIR) planes during the quarter.
In the health care arena, the company reported sales of $5.04 billion, which remained flat from the year-ago quarter. Orders bagged during the quarter were valued at $5.9 billion, which reflected a gain of 2%. Segment profit came in at $1.2 billion, which grew 1% thanks to higher volume and reduced cost, which was partially offset by inflation, tariffs and program investments.
While the power segment saw revenue remaining unchanged from last year, its orders dropped 30% in the reported quarter to $4.5 billion.
The industrial free cash flow
One of the most important metrics of the company, industrial free cash flow, came in at $2.3 billion in 2019. This is ahead of company's guidance of around $2 billion, implying that the company has sufficient cash generation to pursue new oppoortunities to enhance shareholders' value.
The company has raised industrial free cash flow guidance above analyts' projections, predicting it to be between $2 billion and $4 billion. This partially reflects GE's expectations of the Boeing 737 Max returning to service around mid-year and profits from selling its biopharma business to Danaher (NYSE:DHR).
Earnings prediction
For 2020, the company projects adjusted earnings to be around 50 to 60 cents per share, which is lower than the 67 cents analyts are projecting. The company's guidance, however, highly depends on how quickly the Boeing 737 Max returns to service this year.
Disclosure: I do not hold any positions in the stocks mentioned.
Read more here:
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
This article first appeared on GuruFocus.
