General Electric Company (NYSE:GE) has announced its adjusted earnings for the third quarter of 2023, reporting an impressive figure of 82 cents per share. This result exceeded the Consensus Estimate, which had projected adjusted earnings of 56 cents per share. The bottom line exhibited substantial growth, marking a remarkable 134.3% increase compared to the previous year.

In terms of total revenues, GE reported $17,346 million, surpassing the consensus estimate of $15,675 million. This figure indicates a substantial 19.9% increase in the top line compared to the previous year.

Segmental Breakdown

Starting from the first quarter of 2023, GE began categorizing its revenues under two segments: GE Aerospace and GE Vernova. Notably, GE HealthCare was successfully spun off into an independent publicly traded company during this period, with GE retaining approximately 19.9% ownership of GE HealthCare’s common stock.

The Aerospace segment experienced a substantial 25% year-over-year increase in revenues, reaching $8,409 million in the reported quarter. This growth was primarily attributed to robust demand for commercial engines and services, spare parts, and Defense. The Consensus Estimate for the quarter had projected revenues of $7,896 million. The segment’s organic revenues also saw a substantial 25% year-over-year increase, while orders witnessed a notable 34% growth compared to the previous year.

GE Vernova consists of two subsegments: Renewable Energy and Power. The Renewable Energy segment’s revenues amounted to $4,151 million, indicating a 15% year-over-year increase and surpassing the consensus estimate of $3,676 million. Organic revenues in this segment grew by 14%, with the results benefitting from equipment growth in the grid, onshore wind projects in North America, and offshore wind initiatives. Orders in this segment also increased by 5% year over year on a reported basis.

In the Power segment, revenues experienced a year-over-year increase of 13%, reaching $3,974 million. The consensus estimate for the quarter had projected revenues of $3,664 million. Organic revenues within this segment increased by 9%, with strong performance noted in heavy-duty gas turbines and aero-derivative equipment. Orders for the Power segment grew by 2% on a reported basis year over year.

Profitability Metrics

During the third quarter, General Electric saw its cost of sales increase by 11.9% year over year to reach $12,362 million. Selling, general, and administrative expenses also experienced a 10.4% year-over-year increase, reaching $2,171 million. Research and development expenses totaled $471 million, reflecting a 10.6% increase compared to the previous year.

General Electric’s adjusted profit amounted to $1,615 million, marking a substantial 349.9% year-over-year increase. The company reported a margin of 9.8% for the quarter, signifying a substantial increase of 720 basis points. Notably, the Aerospace segment reported a profit of $1,712 million, reflecting a 33% increase year over year. In contrast, the Renewable Energy sub-segment (a part of GE Vernova) reported a loss of $317 million, a notable improvement compared to the $934 million loss in the same quarter of the previous year. The Power sub-segment (part of GE Vernova) reported a profit of $238 million, indicating a 69% year-over-year increase.

Financial Position and Cash Flow

At the end of the third quarter, General Electric had cash, cash equivalents, and restricted cash totaling $13,127 million, compared to $15,810 million at the close of December 2022. The company’s long-term borrowings amounted to $19,488 million at the end of the third quarter, compared to $20,320 million at the end of December 2022.

Notably, General Electric achieved adjusted free cash inflow of $2,189 million during the first nine months of 2023, a significant improvement from the free cash outflow of $279 million in the same period of the previous year.

Throughout the first nine months of 2023, GE allocated $501 million to dividend payments, marking a 10.1% increase year over year. The company also repurchased approximately 2.2 million shares for a total of $0.3 billion during the third quarter.

Outlook

General Electric has raised its earnings per share guidance for 2023, now projecting adjusted earnings within the range of $2.55 to $2.65 per share. This surpasses the previously anticipated range of $2.10 to $2.30 per share. The Consensus Estimate for earnings per share is $2.32. Additionally, GE expects low-teens-digit revenue growth in 2023, an improvement from the previously projected low-double-digit growth. The company anticipates a free cash flow of approximately $4.7 to $5.1 billion for the ongoing year, compared to the earlier forecast of $4.1 to $4.6 billion.

In 2023, General Electric predicts low 20% organic revenue growth for the Aerospace segment and high-single-digit organic revenue growth for the Vernova segment.

 

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