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GE Earnings

GE Grew Organic Revenue, Boosted Margins And Delivered Cash In 2019

GE said that it met or exceeded its total financial targets in 2019. The company reported strong 2019 fourth-quarter and year-end results, including organic revenue growth, margin expansion and positive cash flow.

GE reported a 4.6% increase in Industrial segment organic revenue* to $24.7 billion in the fourth quarter of 2019, and a 5.5% increase to $88.1 billion for the whole year. The company also expanded its adjusted Industrial profit margin* by 410 basis points to 11.3% in the quarter, and by 60 basis points to 10% for the whole year.

The company reported Industrial free cash flow* of $3.9 billion for the quarter and $2.3 billion for the year. Adjusted earnings per share* of $0.21 in the quarter were up 50% compared to the same period in 2018. For the whole year, the same metric stood at $0.65, up 14%, which is at the high end of its most recent outlook.

“The fourth quarter marked a strong close to the year for GE,” said H. Lawrence Culp Jr., GE chairman and CEO. “We met or exceeded our full-year financial targets and are on a positive trajectory for 2020. We’re proud of our progress in 2019, including decisive actions to reduce our leverage and strengthen our businesses. Our work continues, but GE’s committed team, exceptional technology, and global network make me more confident than ever that we can deliver.”

The company ended the quarter with a strong backlog of $405 billion, up 15% year-over-year. Some 80% of the backlog consisted of services, an important profitability driver that allows GE to build long-term ties with its customers.

GE also reported progress in important strategic priorities, such as reducing its debt ratio and improving its performance by rolling out the Lean system of management across its factories.

When it comes to debt, the company said it reduced net debt* by $7 billion, bringing its Industrial leverage ratio from 4.8x net debt* to EBITDA* in 2018 to 4.2x in 2019. GE used cash from Wabtec and Baker Hughes transactions to pay down debt, including a $5 billion debt tender. Earlier in 2019, GE also announced the sale of its BioPharma division to generate further cash for deleveraging as well as U.S. pension benefit changes to further reduce debt.

GE Capital also reduced its debt by $7 billion, bringing its leverage target from 5.7x debt to equity in 2018 to 3.9x in 2019. The unit completed asset reductions of approximately $12 billion, exceeding its 2019 target of $10 billion and its two-year target of $25 billion. GE Capital also closed the majority of the sale of the aircraft lender PK AirFinance.

The company’s operational results also reflect its push to deploy the Lean system throughout GE. Lean has allowed the company to establish common operating processes and metrics throughout the company, as well as standard operational, talent, strategy, and budget reviews. For example, using Lean, a GE Aviation plant in Batesville, Mississippi, was able to reduce losses by more than 60% so far, saving millions of dollars’ worth of waste this year.

Speaking of individual GE businesses, they continued to strengthen, starting with GE Power. The Porto de Sergipe plant in Brazil,  for example, will be using three record-breaking GE 7HA.02 gas turbines installed for the first time in the country. “We are very proud of this milestone and to know that we are generating reliable power to the Brazilian people,” says Luciano Silva, a project director at GE Gas Power. The three turbines, together with a giant steam turbine and three heat recovery steam generators (HRSG), are capable of generating a whopping 1.5 GW, or around 15% of Brazil’s Northeast region’s power needs. In fact, Porto de Sergipe will be the largest combined-cycle, gas-fired power plant in South America.

At GE Renewable Energy, GE’s newest and most powerful offshore wind turbine, the Haliade-X, became the first wind turbine to produce 262 megawatt-hours of energy in 24 hours. That’s enough energy to power 30,000 households in Rotterdam, Holland, where it is located. GE Renewable Energy completed the turbine in the fall and signed an agreement to sell the electricity generated by the prototype to the sustainable energy company Eneco, which will supply it to customers.

GE Aviation is not only helping airlines fly straight — it is helping them fly smart, too. Emirates, for example, is adopting a GE Aviation data and analytics platform that will allow airline analysts and pilots to understand how their planes are operating with a high degree of precision, accuracy and automation.

 

GE Healthcare is using artificial intelligence to make healthcare imaging quicker, kinder and more efficient — like Critical Care Suite, a collection of algorithms embedded in a mobile X-ray device that can sort through hundreds of images and call doctors’ attention to anything that looks suspicious. It was recently cleared for use by the FDA, so that radiologists can begin using the technology in 2020. The AI was developed on Edison, a GE Healthcare platform that hosts a slew of apps designed to help clinicians do their jobs better. Time magazine also honored GE Healthcare’s Senographe Pristina with Dueta, a mammography system designed with the patient in mind, as one of the best inventions of 2019. The team of women who created the Senographe Pristina wanted to allay the anxiety and discomfort many women feel when faced with the prospect of a mammogram and — as a result — to encourage regular scans and early detection of breast cancer.

Looking forward, GE also announced its financial targets for 2020. It said its industrial revenues* would grow organically in the low-single-digit range, adjusted GE Industrial margin* would expand organically in a range from 0 to 75 basis points, adjusted earnings per share* would come in between  $0.50 to $0.60, and GE Industrial free cash flow* would reach $2 billion to $4 billion. GE will hold an Investor Update on Wednesday, March 4. “Our priorities looking forward are clear,” Culp said. “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 multiyear transformation.”

For important information about forward-looking statements, see http://www.ge.com/investor-relations/disclaimer-caution-concerning-forward-looking-statements.

*Non-GAAP. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in our earnings release and the appendix of our investor presentation for the fourth quarter of 2019, as applicable.

Top: The GE9X, the world’s largest commercial jet engine at GE. Image credit: GE Aviation.

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