3Q '07 Highlights (Net and Continuing Operations)
* Net earnings per share (EPS) of $.54, up 15%; continuing EPS of $.50, up 9%
* Net earnings of $5.5 billion, up 14%; continuing earnings of $5.1 billion, up 7%
* Revenues of $42.5 billion, up 12%; organic revenue growth of 8%; global revenue growth of 15%
* Total orders of $24 billion, up 20%; major equipment orders of $12 billion, up 39%; services orders of $8.2 billion, up 4%
* Return on average total capital (ROTC) increasing 80 basis points (bps) to 18.5%
* Industrial cash flow from operating activities growth of 16%
* 4Q '07 continuing EPS guidance of $.67-.69, up 18-21%, and 2007 full-year continuing EPS guidance of $2.19 -- 2.22, up 18-19%
Fairfield, Conn., Oct. 12, 2007 -- GE announced today third-quarter 2007 net earnings of $5.5 billion or $.54 per share, up 14% and 15%, respectively, from third-quarter 2006. Third-quarter 2007 earnings from continuing operations were $5.1 billion, or $.50 per share up 9%, and reflecting $.06 per share of restructuring and other charges. Revenues from continuing operations were $42.5 billion, up 12%, increasing 8% organically.
GE's total orders were up 20% to $24 billion, and total backlog grew $19 billion year-over-year, an increase of 43%. Major equipment orders were $12 billion, up 39%, and major equipment backlog grew to $47 billion, up 56%. Services orders were up 4%, and Customer Service Agreement (CSA) backlog stood at $96 billion, up 7%.
GE achieved its eleventh straight quarter of organic revenue growth of 2-3 times global GDP. Services revenues were up 7% and global revenues grew 15%. GE's year-to-date segment operating profit margin was up 70 bps to 15.8%.
"GE delivered a solid quarter in spite of extreme volatility in the financial services market and some one-time items in our industrial businesses," GE Chairman and CEO Jeff Immelt said. "Infrastructure delivered double-digit segment profit growth of 12%, led by a strong performance at Oil & Gas, Transportation, and Energy. Our Aviation business remains solid with equipment order growth of 93%. In the quarter, we had an increase in our aviation development programs of $0.1 billion.
"Commercial Finance and GE Money generated broad-based earnings growth of 12% and 13%, respectively. These businesses had approximately $0.1 billion of impact in the quarter due to market volatility. With our global strength and the re-pricing of risk, these businesses are built to perform.
"NBC Universal posted its fourth straight quarter of segment profit growth, highlighted by the successful launch of its new, prime-time television line-up, a strong cable performance and a slate of popular summer films. Jeff Zucker and his team have done an excellent job improving the content, operating the business, and expanding the portfolio. Healthcare's results were down slightly year-over-year, and in-line with expectations. The US imaging business continues to face pressure from effects of the Deficit Reduction Act (DRA) and OEC has not started shipping; however, the balance of the Healthcare business is performing very well."
As previously reported, the company realized a $1.8 billion after-tax benefit from the sale of its Plastics business and recorded it in discontinued operations. At the same time, the company took a $1.4 billion charge in discontinued operations for its planned sale of the Japanese personal loan and WMC mortgage businesses. In addition, the company recorded $0.6 billion of after-tax industrial restructuring and other charges in continuing operations, $0.1 billion higher than previously announced.
The year-to-date consolidated effective tax rate was 18%, which is in line with full-year 2007 expectations, and the company is still forecasting a total year tax rate of 17%. GE's consolidated effective tax rate was 11% for the quarter, lowered by the movement of the Japanese personal loan business and WMC into discontinued operations and by the industrial restructuring and other charges.
"We had balanced growth across the portfolio. We were able to offset the $0.1 billion expense from the larger than expected restructuring, the $0.1 billion in increased development programs in Infrastructure, and the $0.1 billion impact in our financial services businesses from financial market volatility. As a result, we have lowered our cost structure, improved our strategic position, and reduced the risk in our financial services businesses, making GE a better company going forward," Immelt said.
The company also filed a Form 8-K today describing immaterial adjustments to its historic financial statements arising from the ongoing review of the company's accounting policies and procedures. These adjustments have an insignificant impact on earnings in 2007.
Third-Quarter 2007 Financial Highlights:
Earnings were $5.5 billion, up 14% from $4.9 billion in third quarter 2006. EPS were $.54, up 15% from last year's $.47. Earnings from continuing operations were a $5.1 billion, up 7% from $4.7 billion in third quarter 2006. EPS from continuing operations were $.50, up 9% from last year's $.46 reflecting strong double-digit earnings growth at the Infrastructure and Commercial Finance businesses and restructuring and other charges. Earnings from discontinued operations were $0.5 billion, or $.04 per share. Effective in the third quarter 2007, discontinued operations for all periods presented include the results of WMC and our Japan personal loan business. Discontinued operations also include the results of our Plastics business, which was sold in the third quarter 2007 at an after-tax gain of $1.8 billion and the Advanced Materials business, sold in the fourth quarter 2006.
Continuing revenues grew 12% to $42.5 billion. GE industrial sales were $24.7 billion, an increase of 11% from third quarter 2006, reflecting core growth and the net effect of acquisitions. Financial services revenues grew 16% over last year to $18.1 billion, primarily reflecting core growth.
Cash generated from GE's continuing operating activities (CFOA) in the first nine months of 2007 totaled $16.3 billion, down 8% from $17.7 billion last year. Industrial CFOA grew 16% to $10.5 billion.
The company increased its return on total capital 80 bps to 18.5%, and is on target to reach its goal of 20% by the end of 2008. GE bought $6.3 billion worth of its common stock in the quarter and plans to buy back an additional $5.7 billion worth of its common stock in the fourth quarter of 2007.
"Our outlook for the remainder of the year is strong. We have a better set of financial services businesses and a successful turnaround at NBC Universal, and we will have earnings acceleration in Infrastructure. We are forecasting fourth quarter EPS from continuing operations of $.67-.69, up 18-21% over comparable 2006 earnings. We are reaffirming guidance of $2.19 -- 2.22, up 18-19% for the full year and are on track to deliver a solid, low-risk performance in 2007," Immelt said.
GE will discuss preliminary third-quarter results on a conference call and Webcast at 8:30 a.m. ET today. Call information is available at www.ge.com/investor, and related charts will be posted there prior to the call.
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GE (NYSE: GE) is Imagination at Work -- a diversified technology, media and financial services company focused on solving some of the world's toughest problems. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, and media content, GE serves customers in more than 100 countries and employs more than 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com.
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