GE AEROSPACE GE ANNOUNCES THIRD QUARTER 2021 RESULTS
Strong performance continues; raises 2021 adjusted EPS* outlook, narrows Industrial free cash flow* range
- Total orders $22.1B, +42%; organic orders +42%
- Total revenues (GAAP) $18.4B, (1)%; Industrial organic revenues* $17.6B, (1)%
- Industrial profit margin (GAAP) of 5.0%, +1,220 bps; adjusted Industrial profit margin* 7.5%, +270 bps
- Continuing EPS (GAAP) of $0.54, +$1.58; adjusted EPS* $0.57, +$0.19
- GE Industrial CFOA (GAAP) $1.7B, +$1.6B; GE Industrial free cash flow* $1.7B, +$1.8B, excluding discontinued factoring programs*
- Updating 2021 outlook for Industrial organic revenue* growth to approximately flat, adjusted Industrial profit margin* expansion to 350+ basis points, adjusted EPS* to $1.80-$2.10, Industrial free cash flow* to $3.75B-$4.75B
BOSTON - October 26, 2021 - GE (NYSE:GE) announced results today for the third quarter ending September 30, 2021.
GE Chairman and CEO H. Lawrence Culp, Jr. said, "The GE team delivered another strong quarter. Orders grew, margins expanded, our overall cash performance was significantly better, and Aviation is building momentum and showing continued signs of recovery. The teams are managing through a challenging operating environment, including global supply chain disruptions and onshore wind market pressure due to the U.S. Production Tax Credit. Against that backdrop, we're raising our 2021 EPS expectations and narrowing our full-year free cash flow outlook."
Culp continued, "Closing the GECAS transaction on November 1 will mark an important milestone in GE's transformation to a more focused, simpler, stronger high-tech industrial company. Our progress strengthening our balance sheet and operations enables us to drive long-term growth and value in our businesses. With leading positions in our markets, we are serving customers with vital equipment and services that shape the future of flight, advance precision health, and lead the energy transition. We remain on track to deliver high single-digit free cash flow margins over time."
GE continues to make progress in its transformation:
- Solidifying financial position and focusing on industrial core: GE and AerCap obtained all required regulatory clearances for the GECAS transaction and expect to close November 1, subject to other customary closing conditions. GE expects to use the proceeds to further reduce debt, with total reduction since the end of 2018 now expected to reach approximately $75 billion. Following close, the remainder of GE Capital will be reported within Corporate, simplifying the presentation of GE's results and moving from three-column to one-column financial statement reporting.
- Accelerating lean and decentralization: GE's lean transformation continues to scale across the businesses and drive meaningful and sustainable progress in safety, quality, delivery, cost, and cash. The teams are making improvements in both manufacturing and transactional settings, such as 10% faster turnaround time at Aviation's overhaul and component repair shops and 30% average billing cycle time improvement at Steam Power.
- Driving long-term growth and value across our businesses: GE is playing offense through commercial execution, new product introductions, and technology innovation, complemented by inorganic growth:
- Future of Flight:Completedfirst flight of the CatalystTM engine, the first clean-sheet turboprop design to enter the business and general aviation market in 50 years. Securedan order from Hindustan Aeronautics Limited (HAL) for nearly 100 F404 engines and support services, valued at more than $700 million.
- Precision Health:Will acquireBK Medical for a cash purchase price of $1.45 billion, expanding Healthcare's ultrasound platform from diagnostics to surgical and therapeutic interventions, as well as patient monitoring. IntroducedEdison True Picture Archive and Communication System (TruePACS), an AI-enabled,cloud-based diagnostic imaging and workflow solution for radiologists.
- Energy Transition:Startedoperating GE's Haliade-X offshore wind prototype turbine at 14 MW, a first in the industry. Delivered, installed, and commissioned four TM2500 aeroderivative gas turbines to complement renewable power generation in California, helping to enhance reliability and sustainability of the grid.
* Non-GAAP Financial Measure
Financials reflect 3Q'21 quarterly results; variances are on a year-over-year basis
Total Company Results
We present both GAAP and non-GAAP measures to provide investors with additional information. We believe that providing these non-GAAP measures along with GAAP measures allows for increased comparability of our ongoing performance from period to period. Please see pages 5 - 10 for explanations of why we use these non-GAAP measures and the reconciliation to the most comparable GAAP financial measures.
Three months ended September 30 | Nine months ended September 30 | ||||||
Dollars in millions; per-share amounts in dollars and | |||||||
2021 | 2020 | Year on Year | 2021 | 2020 | Year on Year | ||
diluted | |||||||
GAAP Metrics | |||||||
GE Industrial Cash from Operating Activities (CFOA) | $1,690 | $90 | F | $(832) | $(3,175) | 74 % | |
Continuing EPS | 0.54 | (1.04) | F | (0.01) | 3.39 | U | |
Net EPS | 1.08 | (1.09) | F | (2.61) | 2.41 | U | |
Total Revenues | 18,429 | 18,529 | (1)% | 53,826 | 54,823 | (2)% | |
GE Industrial Profit Margin | 5.0 % | (7.2)% | 1,220 bps | 2.0 % | 8.3 % | (630) bps | |
Non-GAAP Metrics | |||||||
GE Industrial Free Cash Flows (FCF) | $1,727 | $514 | F | $1,270 | $(3,761) | F | |
Adjusted EPS-a) | 0.57 | 0.38 | 50 % | 1.20 | (0.55) | F | |
GE Industrial Organic Revenues | 17,636 | 17,876 | (1)% | 50,577 | 51,496 | (2)% | |
Adjusted GE Industrial Profit-b) | 1,337 | 865 | 55 % | 3,099 | 1,231 | F | |
Adjusted GE Industrial Profit Margin-b) | 7.5 % | 4.8 % | 270 bps | 6.0 % | 2.3 % | 370 bps |
(a- Excludes non-operating benefit costs, gains (losses), and restructuring & other charges
(b- Excludes interest and other financial charges, non-operating benefit costs, gains (losses), and restructuring & other charges
In the third quarter:
- GE Capital completed its annual Insurance premium deficiency test, which resulted in a positive margin with no impact to earnings for the second consecutive year. The margin increase was largely driven by a higher discount rate, reflecting further development of GE's previously-communicated investment portfolio realignment strategy with a higher allocation towards select growth assets.
- As previously reported, GE completed the 1-for-8 reverse stock split. GE common stock began trading on a split- adjusted basis on August 2, 2021. Effective this quarter, shares of GE's outstanding common stock and earnings per share calculation have been retroactively restated for all periods presented.
Outlook
GE is updating its full-year 2021 outlook for the company, and it now expects:
2021 Outlook, | 2Q Earnings Update, | 3Q Earnings Update, | |
as of March 2021 | as of July 2021 | as of October 2021 | |
GE Industrial organic revenue* | Low single-digit growth | Low single-digit growth | ~Flat |
Adjusted GE Industrial profit | 250+ bps expansion | 250+ bps expansion | 350+ bps expansion |
margin* | |||
Adjusted earnings per share* | $1.20-$2.00-a) | $1.20-$2.00-a) | $1.80-$2.10 |
GE Industrial free cash flow* | $2.5-$4.5 billion | $3.5-$5.0 billion | $3.75-$4.75 billion |
(a- EPS estimates given at outlook changed from $0.15-$0.25 to $1.20-$2.00 post 1:8 reverse stock split effective close of trading July 30, 2021
GE expects revenue growth, margin expansion, and higher free cash flow* in 2022, and will provide more detail during fourth quarter earnings and 2022 Outlook.
* Non-GAAP Financial Measure
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Results by Reporting Segment
The following segment discussions and variance explanations are intended to reflect management's view of the relevant comparisons of financial results.
Aviation
Three months ended September 30 | Nine months ended September 30 | ||||||
(in millions) | 2021 | 2020 | Year on Year | 2021 | 2020 | Year on Year | |
Orders | $6,900 | $4,072 | 69 % | $17,884 | $15,259 | 17 % | |
Revenues | 5,398 | 4,919 | 10 % | 15,230 | 16,196 | (6)% | |
Segment Profit/(Loss) | 846 | 350 | F | 1,664 | 665 | F | |
Segment Profit/(Loss) Margin | 15.7 % | 7.1 % | 860 bps | 10.9 % | 4.1 % | 680 bps | |
Orders of $6.9 billion increased 69% reported and 70% organically as Commercial Engines and Commercial Services grew substantially again. Military orders increased, reflecting the HAL F404 order mentioned above. Revenues of $5.4 billion were up 10% reported and organically*. Commercial Services was up significantly with strength in external spares, and Commercial Engines decreased with lower shipments. Military revenue was down marginally. Unit shipments were flat sequentially but up year-over-year. Segment margin of 15.7% expanded by 860 basis points reported and 850 basis points organically*, driven by Commercial Services and operational cost reduction.
Healthcare
Three months ended September 30 | Nine months ended September 30 | ||||||
(in millions) | 2021 | 2020 | Year on Year | 2021 | 2020 | Year on Year | |
Orders | $4,973 | $4,125 | 21 % | $14,293 | $13,662 | 5 % | |
Revenues | 4,339 | 4,565 | (5)% | 13,100 | 13,185 | (1)% | |
Segment Profit/(Loss) | 704 | 738 | (5)% | 2,203 | 2,111 | 4 % | |
Segment Profit/(Loss) Margin | 16.2 % | 16.2 % | - bps | 16.8 % | 16.0 % | 80 bps | |
Orders of $5.0 billion increased 21% reported and 19% organically, also up double digits versus 3Q'19. Healthcare Systems (HCS) orders increased more than 20% organically year-over-year, growing double-digits in Imaging, Ultrasound, and Life Care Solutions (LCS). Pharmaceutical Diagnostics (PDx) orders grew 6% reported and 8% organically, and increased low single-digits versus 3Q'19. Revenues of $4.3 billion decreased 5% reported and 6% organically* due to ongoing industry-wide supply shortages. HCS organic revenues* declined 8%, which more than offset 8% organic* growth in PDx. Segment margin of 16.2% was flat reported and contracted 60 basis points organically* year-over-year, driven by higher inflation and lower LCS equipment revenue associated with the partnership with Ford to deliver ventilators to the U.S. Department of Health and Human Services. This was partially offset by productivity and higher PDx volume. Even with supply chain challenges, organic margins* are now expected to expand close to 100 bps this year as the team proactively manages sourcing and logistics. Healthcare is well positioned to keep investing in future growth with improving profit and cash flow generation.
Renewable Energy
Three months ended September 30 | Nine months ended September 30 | ||||||
(in millions) | 2021 | 2020 | Year on Year | 2021 | 2020 | Year on Year | |
Orders | $6,588 | $3,981 | 65 % | $13,312 | $10,036 | 33 % | |
Revenues | 4,208 | 4,525 | (7)% | 11,505 | 11,224 | 3 % | |
Segment Profit/(Loss) | (151) | (51) | U | (484) | (628) | 23 % | |
Segment Profit/(Loss) Margin | (3.6)% | (1.1)% | (250) bps | (4.2)% | (5.6)% | 140 bps | |
Orders of $6.6 billion increased 65% reported and organically, driven by Offshore Wind. Onshore Wind orders grew modestly, driven by services and international equipment, and partially offset by lower U.S. equipment due to Production Tax Credit (PTC) dynamics. Revenues of $4.2 billion decreased 7% reported and 9% organically*, largely due to Onshore Wind services with fewer repower deliveries. For the year, GE now expects Renewable Energy revenue outlook to be roughly flat. Segment margin of (3.6)% contracted by 250 basis points reported and organically*. Onshore Wind was slightly positive but down year-over-year, where cost reductions were more than offset by lower U.S. repower volume, mix headwinds as new products ramp and come down the cost curve, and supply chain pressure. Offshore Wind margins remain negative as the business works through legacy projects. In Grid, better execution was more than offset by lower volume. Due mainly to the U.S. PTC impact, free cash flow* is expected to be down and negative this year.
* Non-GAAP Financial Measure
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Power
Three months ended September 30 | Nine months ended September 30 | ||||||
(in millions) | 2021 | 2020 | Year on Year | 2021 | 2020 | Year on Year | |
Orders | $3,667 | $3,388 | 8 % | $12,106 | $10,370 | 17 % | |
Revenues | 4,026 | 4,025 | - % | 12,242 | 12,206 | - % | |
Segment Profit/(Loss) | 204 | 148 | 38 % | 416 | (32) | F | |
Segment Profit/(Loss) Margin | 5.1 % | 3.7 % | 140 bps | 3.4 % | (0.3)% | 370 bps | |
Orders of $3.7 billion increased 8% reported and 6% organically, driven by Gas Power services, Aeroderivative equipment, and Steam, each up double digits. Gas Power equipment orders were down despite booking six more heavy duty gas turbines, largely smaller frame units. Timing for HAs remains uneven across quarters due to disciplined underwriting. Revenues of $4.0 billion were flat reported and decreased 1% organically*. Equipment revenue was down with reduced turnkey scope at Gas Power and the continued exit of new build coal at Steam. Services was up, with Gas Power services up high single-digits, trending better than initial outlook, due to strong long-term service agreement volume. GE now expects Gas Power services to grow high single- digits this year. Segment margin of 5.1% expanded 140 basis points reported and 130 basis points organically*, largely due to positive mix from services and Aeroderivative shipments at Gas Power, as well as margin expansion at Power Conversion. GE remains on track with the continued exit of new build coal in Steam Power.
GE Capital
Three months ended September 30 | Nine months ended September 30 | ||||||
(in millions) | 2021 | 2020 | Year on Year | 2021 | 2020 | Year on Year | |
Capital continuing operations | $(142) | $(29) | U | $(887) | $(692) | (28)% | |
Discontinued operations | 611 | (48) | F | (2,851) | (1,039) | U | |
GE Capital Earnings | $469 | $(78) | F | $(3,739) | $(1,731) | U | |
(in billions) | September 30, 2021 | December 31, 2020 | Variance | ||||
GE Capital continuing operations assets | $66.3 | $77.7 | $(11.4) | ||||
Continuing operations and adjusted continuing operations* generated a net loss of $0.1 billion, unfavorable compared to 3Q'20, driven primarily by the non-repeat of prior year tax benefits. This result was partially offset by the discontinuation of preferred dividend payments, which are now a GE Industrial obligation.
Discontinued operations, which were favorable year-over-year, generated a net gain of $0.6 billion, primarily due to the recent increase in AerCap's stock price, which is updated quarterly.
GE Capital continuing operations ended the quarter with $66.3 billion of assets, including $7.0 billion of liquidity.
* Non-GAAP Financial Measure
4
GENERAL ELECTRIC COMPANY
Financial Measures That Supplement GAAP
We believe that presenting non-GAAP financial measures provides management and investors useful measures to evaluate performance and trends of the total company and its businesses. This includes adjustments in recent periods to GAAP financial measures to increase period-to-period comparability following actions to strengthen our overall financial position and how we manage our business.
In addition, management recognizes that certain non-GAAP terms may be interpreted differently by other companies under different circumstances. In various sections of this report we have made reference to the following non-GAAP financial measures in describing our (1) revenues, specifically GE Industrial organic revenues by segment; GE Industrial organic revenues; Healthcare Systems organic revenues; and PDx organic revenues, (2) profit, specifically GE Industrial organic profit and profit margin by segment; Adjusted GE Industrial profit and profit margin (excluding certain items); Adjusted GE Industrial organic profit and profit margin; Adjusted earnings (loss); and Adjusted earnings (loss) per share (EPS), (3) cash flows, specifically GE Industrial free cash flows (FCF) and GE Industrial rebaselined FCF, and (4) outlook, specifically 2021 Adjusted EPS; and 2021 GE Industrial free cash flows.
The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow. Certain columns, rows or percentages within these reconciliations may not add or recalculate due to the use of rounded numbers. Totals and percentages presented are calculated from the underlying numbers in millions.
GE INDUSTRIAL ORGANIC REVENUES, PROFIT (LOSS) AND PROFIT MARGIN BY SEGMENT (NON-GAAP)
(Dollars in millions) | Revenues | Segment profit (loss) | Profit margin | ||||||||||
Three months ended September 30 | 2021 | 2020 | V% | 2021 | 2020 | V% | 2021 | 2020 | V Bps | ||||
Aviation (GAAP) | $ 5,398 | $ 4,919 | 10 % | $ | 846 | $ | 350 | F | 15.7 % | 7.1 % | 860bps | ||
Less: acquisitions | - | - | - | - | |||||||||
Less: business dispositions | - | 12 | - | (12) | |||||||||
Less: foreign currency effect | (9) | - | (13) | - | |||||||||
Aviation organic (Non-GAAP) | $ 5,408 | $ 4,908 | 10 % | $ | 858 | $ | 362 | F | 15.9 % | 7.4 % | 850bps | ||
Healthcare (GAAP) | $ 4,339 | $ 4,565 | (5)% | $ | 704 | $ | 738 | (5)% | 16.2 % | 16.2 % | -bps | ||
Less: acquisitions | - | (23) | (9) | (13) | |||||||||
Less: business dispositions | - | 21 | - | (2) | |||||||||
Less: foreign currency effect | 49 | - | 31 | - | |||||||||
Healthcare organic (Non-GAAP) | $ 4,289 | $ 4,567 | (6)% | $ | 681 | $ | 753 | (10)% | 15.9 % | 16.5 % | (60)bps | ||
Renewable Energy (GAAP) | $ 4,208 | $ 4,525 | (7)% | $ | (151) | $ | (51) | U | (3.6)% | (1.1)% | (250)bps | ||
Less: acquisitions | - | - | - | - | |||||||||
Less: business dispositions | - | - | - | - | |||||||||
Less: foreign currency effect | 101 | - | (4) | - | |||||||||
Renewable Energy organic (Non-GAAP) | $ 4,106 | $ 4,525 | (9)% | $ | (147) | $ | (51) | U | (3.6)% | (1.1)% | (250)bps | ||
Power (GAAP) | $ 4,026 | $ 4,025 | - % | $ | 204 | $ | 148 | 38 % | 5.1 % | 3.7 % | 140bps | ||
Less: acquisitions | - | - | - | - | |||||||||
Less: business dispositions | - | - | - | - | |||||||||
Less: foreign currency effect | 39 | - | 6 | - | |||||||||
Power organic (Non-GAAP) | $ 3,988 | $ 4,025 | (1)% | $ | 198 | $ | 148 | 34 % | 5.0 % | 3.7 % | 130bps |
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GE - General Electric Company published this content on 26 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 October 2021 10:25:10 UTC.
