GE sees profit surge as Immelt bets big on new 'Industrial Revolution'
17 Dec 2015
General Electric Co on Wednesday reported a 2-4 per cent growth in its organic revenue as it focuses on new industrial verticals, which, it said, will drive higher operating earnings next year, despite sluggish conditions in the global economy and falling profits in its oil-and-gas and transportation businesses.
GE, the biggest industrial enterprise in the United States, reported a 16-per cent increase in its third quarter earnings per share from industrial and other verticals at $0.29 per share.
The company also reaffirmed 2015 revenue of $27.9 billion with segment profit of $4.5 billion, accounting for a margin of 17.3 per cent.
GE predicted per-share operating earnings of $1.45 to $1.55 in 2016, compared with its goal of $1.28 to $1.35 in 2015.
GE, the maker of everything from locomotives to light bulbs, also said it would pay out $26 billion to investors in 2016 through a combination of dividends and share buybacks, as it continues selling off its once-massive lending business.
Addressing a crowd of investors and analysts who packed the Studio 8H inside New York's 30 Rockefeller Plaza on Wednesday afternoon, chief executive Jeffrey Immelt outlined the steps he has taken to turn GE into the world's largest digital industrial company.
''We're the only company that will have the machines, analytics and operating systems,'' he said. ''That's how we'll play the Industrial Internet.''
He expects next year to be one of economic uncertainty, geopolitical turmoil and slow growth. But, despite that, Immelt said GE should deliver double-digit gains in earnings per share in 2016.
For 2016, the conglomerate forecast 2 per cent to 4 per cent organic revenue growth in its core businesses, compared with about 4 per cent growth so far this year. Organic revenue excludes acquisitions and divestitures. GE predicted per-share operating earnings of $1.45 to $1.55 in 2016, compared with its goal of $1.28 to $1.35 in 2015.
He said the company's stronger industrial businesses, like jet engines and gas turbines, should be enough to offset the weakness in its big oil field equipment unit, which has had orders drop sharply as oil prices have plummeted.
Immelt said GE's acquisition of Alstom's energy and grid business, the largest industrial acquisition in its history, added to the company's industrial strength and provided an opportunity to connect GE's digital services to Alstom's global industrial footprint. He also said GE was ahead of its plan to sell most of GE Capital's assets and exit the majority of banking operations.
GE's biggest task in 2016 will be to ''keep executing on the digital industrial strategy,'' Immelt stressed.
GE Capital said it would sell assets valued at $200 billion by the end of 2017. As of today, the company has closed transactions valued at more than $100 billion and signed transactions valued at $154 billion. GE Capital also successfully completed the $20.4 billion public offering of Synchrony Financial. The deal will allow GE to return more than $90 billion to shareholders through dividends and share buybacks.
But the company will still provide jet engine and infrastructure financing for projects like the Caithness Moxie Freedom power plant in Pennsylvania, which will use a pair of America's largest and most efficient gas turbines. The turbines, called 7HA, were developed by GE and like other GE technology, they can be connected to the Industrial Internet.
Last fall GE acquired the energy and grid business of Alstom, including Alstom's huge Haliade offshore wind turbines. Alstom was GE's largest acquisition ever. Their combined power generation assets can now supply with energy 30 per cent of the world.
GE also launched GE Digital, the foundation for its transformation into the world's largest digital industrial company. The new unit will work closely with all GE businesses and help them and their customers take advantage of the Industrial Internet.
One new solution is the digital power plant complete with the physical plant's ''digital twin.'' The digital power plant will help operators reduce costs and predict problems before they lead to unplanned downtime.
In October, the company announced Current – a startup that combines energy hardware with digital intelligence. Current's intelligent LED street lamps can already see and hear things and measure air quality.
GE can move fast because of the GE Store, which allows it to quickly transfer technology, expertise, talent, and culture across its global industrial businesses. The store holds next-generation components like silicon carbide chips. They will have applications in energy, aviation, healthcare and many other industries.
Last spring, as Egypt faced a record-breaking heat wave, GE supplied the country with turbines and other technology capable of generating 2.6 gigawatts of electricity.
The company also this year signed $2.6 billion deal to supply 1,000 trains of the Evolution Series to India. GE's Evolution Series Tier 4 locomotive is the first freight train engine that meets the US government's strict Tier 4 emission standards.
GE also launched Predix, a cloud-based software platform for the Industrial Internet and opened it to outside developers. Predix is similar to iOS or Android, but built for machines. The platform allows developers to write apps for everything from CT and MRI scanners to jet engines and help move GE, its customers and partners into the digital industrial era.
GE Healthcare launched the Predix-powered Health Cloud in November. The cloud and apps will help doctors diagnose and treat everything from stroke to diabetes and transform healthcare.
