GE Boasts Solid Growth in 2012, with New Products Taking Off and Backlog Booming

Researched by Industrial Info Resources (Sugar Land, Texas)--Power and manufacturing giant General Electric Company (NYSE:GE) (Fairfield, Connecticut) reported strong overall progress for fourth-quarter and full-year 2012, as the company boasted solid international growth, a string of successful new product introductions, and the largest order backlog in its history. Net earnings were reported to be $4.01 billion for the quarter, a 7.53% increase from fourth-quarter 2011, and $13.64 billion for the year, a 3.97% increase from 2011.

Total revenues stood at $39.99 billion for the quarter, a 3.57% increase from the same period in 2011, and $147.36 billion for the year, basically unchanged from 2011. (When excluding gains from the sale of NBC Universal in 2011, full-year revenues saw an increase of about 3%.) GE saw strong results from the introduction of new products, including FlexEfficiency 60 wind turbine technology and the Tier 4 Evolution Series prototype locomotive, which the company says will be the most fuel-efficient of all freight locomotives. Lighting products shined brightest in the Home & Business Solutions segment, and a solid performance from marine products boosted the Energy Management segment. The company performed especially well internationally, with double-digit growth in Australia, China, Latin America, New Zealand and Russia.

GE ended the fourth quarter with a backlog for equipment and services of $210 billion, a record for GE, an equipment book-to-bill ratio of 1.2. A book-to-bill ratio of more than 1 indicates a company has a demand for orders that exceeds what it can immediately supply. Among the business GE received in the fourth quarter were $400 million in orders for turbo-machinery from Petrobras (NYSE:PBR) (Rio de Janeiro, Brazil), and a $200 million contract with Chevron (NYSE:CVX) (San Ramon, California) to supply subsea production equipment to Chevron's Lianzi project in Angola.

Industrial Info is tracking more than $8.3 billion in active projects involving GE, including a $60 million addition to a locomotive manufacturing plant in Fort Worth, Texas, and the $56 million construction of a grassroot, aircraft component manufacturing plant in Ellisville, Mississippi. The Fort Worth project involves constructing a 240,350-square-foot building addition at an existing facility to manufacture, assemble and remanufacture GE'S leading rail and transportation-related products. The Ellisville project involves constructing a 300,000-square-foot building to manufacture advanced composite components for aircraft engines and systems.

"Our growth initiatives continue to deliver," said chairman and chief executive officer Jeff Immelt in a conference call. "[Geographic] growth regions expanded by 9% in the quarter and 11% for the year."

In October, GE reorganized its segments so that what used to be called "Energy Infrastructure" was split into three new segments: Power & Water, Oil & Gas, and Energy Management. All segments reported profit gains for the quarter and the year:

• The Power & Water segment reported $7.65 billion in revenues for the quarter, a 1.51% increase from fourth-quarter 2011, and $1.75 billion in profits, a 5.18% increase. The segment reported $28.3 billion in revenues for the year, a 10.22% increase from 2011, and $5.42 billion in profits, a 7.99% increase.
• The Oil & Gas segment reported $4.55 billion in revenues for the quarter, an 11.39% increase from fourth-quarter 2011, and $649 million in profits, an 18.65% increase. The segment reported $15.24 billion in revenues for the year, a 12% increase from 2011, and $1.92 billion in profits, a 15.9% increase.
• The Energy Management segment reported $1.93 billion in revenues for the quarter, a 1.02% decrease from fourth-quarter 2011, and $64 million in profits, a 36.17% increase. The segment reported $7.41 billion in revenues for the year, a 15.42% increase from 2011, and $131 million in profits, a 67.95% increase.
• The Aviation segment reported $5.47 billion in revenues for the quarter, an 11.03% increase from the same period last year, and $1.04 billion in profits, a 22.24% increase. The segment reported $19.99 billion in revenues for the year, a 6.02% increase from 2011, and $3.75 billion in profits, a 6.69% increase.
• The Health Care segment reported $5.18 billion in revenues for the quarter, basically the same amount as in fourth-quarter 2011, and $1.02 billion in profits, a 7.14% increase. The segment reported $18.29 billion in revenues for the year, a 1.14% increase from 2011, and $2.92 billion in profits, a 4.17% increase.
• The Transportation segment reported $1.36 billion in revenues for the quarter, a 6.83% decrease from the same period last year, and $252 million in profits, an 11.5% increase. The segment reported $5.61 billion in revenues for the year, a 14.8% increase from 2011, and $1.03 billion in profits, a 36.2% increase.
• The Home & Business Solutions segment reported $2.07 billion in revenues for the quarter, a 2.43% increase from fourth-quarter 2011, and $115 million in profits, compared with only $54 million in the same period in 2011. The segment reported $7.97 billion in revenues for the year, a 3.56% increase from 2011, and $311 million in profits, a 31.22% increase.
• The GE Capital segment reported $11.77 billion in revenues for the quarter, a 1.67% increase from the same period last year, and $1.81 billion in profits, an 8.92% increase. The segment reported $46.04 billion in revenues for the year, a 6.17% decrease from 2011, and $7.4 billion in profits, a 12.41% increase.

For full-year 2013, GE executives expect the company to achieve double-digit earnings growth in its industrial segments as the economy continues to recover and demand continues to strengthen. GE recently entered an agreement to acquire the aviation business of Avio SpA (Turin, Italy) for $4.3 billion. Avio is a manufacturer of aviation propulsion products and systems, and GE believes the deal will strengthen its standing in the profitable jet propulsion sector of the aircraft industry.

"In Avio, we're acquiring an existing position in engine development," Immelt said in the conference call. "They bring complementary technologies to GE. We think there's an opportunity to expand this technology beyond aviation. And there are substantial synergies--about $200 million or more--and relatively low execution risk."

He added, "We believe this will generate a good return for our investors, and we expect to close in the second half of 2013, after approvals."

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