GE released its second quarter 2021 results today, and I encourage you to read the full materials and listen to our earnings call at 8:00 AM ET.
Key highlights on GE’s financial performance this quarter:
- Total orders $18.3B, +33%; organic orders +30%
- Total revenues (GAAP) $18.3B, +9%; Industrial organic revenues* $16.9B, +7%
- Industrial profit margin (GAAP) of (1.3)%, +440 bps; adjusted Industrial profit margin* 5.3%, +940 bps, +1,000 bps organically*
- Continuing EPS (GAAP) of $(0.07), +$0.08; adjusted EPS* $0.05, +$0.19
- GE Industrial CFOA (GAAP) $(2.0)B, $(0.4)B; GE Industrial free cash flow* $0.4B, +$2.0B, excluding discontinued factoring programs*
- Increasing 2021 outlook for Industrial free cash flow* range from $2.5B–$4.5B to $3.5B–$5.0B. Outlook for Industrial organic revenue growth*, margin expansion*, and adjusted EPS* remains unchanged.
GE Chairman and CEO H. Lawrence Culp, Jr. said, “The GE team delivered strong overall performance in the second quarter. Orders and revenue returned to growth, our operating margins expanded across all segments, and we generated positive Industrial free cash flow. Momentum is building across our businesses, driven by Healthcare and services overall, with Aviation showing early signs of recovery. Based on our encouraging cash results, we are increasing our full-year free cash flow outlook.”
Overall, our 2Q performance was strong, and we’re encouraged to see our businesses return to growth and deliver +1000bps of adjusted Industrial organic margin* expansion. At Aviation, we’re seeing new wins across engines and services, despite near-term market challenges continuing to linger due to COVID. While margin expanded significantly year-over-year, it was down sequentially driven primarily by non-cash contract margin review charges of $0.4B. Healthcare delivered another strong quarter with orders and revenue both up double digits organically* as demand remains robust. In Renewables, while the potential production tax credit extension is creating near-term uncertainty in the U.S., we continue to focus on driving profitable growth. Lastly, Power continues to improve with the team stabilizing Gas Power, significant services growth, and executing on our exit of new build coal in Steam Power. On the call, Larry and Carolina will provide further color on our performance, momentum, and outlook.
Our Industrial FCF growth of $2.0B (excluding the impact of discontinued factoring*) was driven largely by better cash earnings and continued working capital improvements. In the quarter, we discontinued the majority of our factoring programs, which was a big step forward and will help our businesses improve cash flow linearity over time. With this stronger quarterly cash performance, we’re increasing our 2021 outlook range for Industrial FCF* to $3.5B - $5.0B.
Broadly speaking, our transformation to a more focused, simpler and stronger high-tech industrial company continues. Yesterday, the European Commission cleared the GECAS-AerCap combination, which follows the conclusion of the U.S. DoJ review in June and AerCap shareholder approval in May. We expect the transaction to close by the end of 2021.
We’re also shifting more toward offense with strategic opportunities – not only through commercial wins today, but also through NPIs and future technology innovations. Highlights include Aviation’s CFM RISE launch, Healthcare’s acquisition of Zionexa, Renewables’ Dogger Bank C contract to provide 87 Haliade-X 14 MW turbines, and Power’s plans to provide Australia’s first dual-fuel capable natural gas and hydrogen power plant.
In all, we’re innovating for a more sustainable world with strategic opportunities in the future of flight, precision health, and the energy transition and we released our 2020 Sustainability Report in July. We continue to serve customers in vital global markets, leveraging our vast installed base and strong service capability. Our focus on growth, profit and cash generation puts us on a clear path to achieve HSD FCF* margins by 2023+.
We appreciate your continued interest in GE, and please take care.
For important information about forward-looking statements, please see here.
*Non-GAAP Financial Measure