General Electric Company (NYSE:GE) recently released its Q3 2023 financial results, revealing adjusted earnings of 82 cents per share. These earnings surpassed the Zacks Consensus Estimate of 56 cents per share, indicating an impressive year-over-year increase of 134.3%. Total revenues for the quarter amounted to $17,346 million, surpassing the consensus estimate of $15,675 million and marking a substantial 19.9% increase compared to the previous year.
Segmental Breakdown
In a significant development, General Electric began reporting its revenues under two segments starting from the first quarter of 2023: GE Aerospace and GE Vernova. This shift followed the completion of the spin-off of GE HealthCare into an independent publicly traded company, with GE retaining an approximately 19.9% stake in GE HealthCare’s common stock.
GE Aerospace reported revenues of $8,409 million, marking a remarkable 25% year-over-year increase. This boost was driven by robust demand for commercial engines and services, spare parts, and defense. The organic revenues within this segment also rose by 25% year over year, while orders grew by an impressive 34% compared to the previous year. The estimate for the quarter was $7,896 million.
The GE Vernova segment encompasses Renewable Energy and Power. The Renewable Energy segment reported revenues of $4,151 million, showing a 15% year-over-year increase and outperforming the consensus estimate for the quarter, which was $3,676 million. Organic revenues in this segment increased by 14%, with results benefiting from equipment growth in the grid, onshore wind in North America, and offshore wind. Orders within the Renewable Energy segment increased by 5% year over year on a reported basis.
The Power segment reported revenues of $3,974 million, up 13% year over year and surpassing the consensus estimate of $3,664 million for the quarter. Organic revenues in this segment increased by 9%, with strong momentum observed in heavy-duty gas turbines and aero-derivative equipment. Orders within the Power segment also grew by 2% on a reported basis year over year.
Profitability and Margins
In the third quarter, General Electric experienced an 11.9% year-over-year increase in its cost of sales, which amounted to $12,362 million. Selling, general, and administrative expenses increased by 10.4% year over year to $2,171 million, while research and development expenses reached $471 million, reflecting a 10.6% increase year over year.
General Electric’s adjusted profit for the quarter was $1,615 million, marking a substantial year-over-year increase of 349.9%. The margin for the quarter was 9.8%, showing a remarkable 720 basis point improvement. On a reported basis, the Aerospace segment reported a profit of $1,712 million, representing a 33% year-over-year increase. However, the Renewable Energy sub-segment (part of GE Vernova) incurred a loss of $317 million, compared with a loss of $934 million in the year-ago quarter. The Power sub-segment (part of GE Vernova) reported a profit of $238 million, up by 69% year over year.
Balance Sheet and Cash Flow
At the close of the third quarter, General Electric held cash, cash equivalents, and restricted cash amounting to $13,127 million, as compared to $15,810 million at the end of December 2022. The company’s long-term borrowings stood at $19,488 million at the end of the third quarter, compared to $20,320 million at the end of December 2022.
During the first nine months of 2023, General Electric rewarded its shareholders with a dividend payment of $501 million, reflecting a 10.1% year-over-year increase. The company also repurchased approximately 2.2 million shares for $0.3 billion during the third quarter.
Outlook
General Electric has raised its earnings per share guidance for 2023. Adjusted earnings are now expected to fall within the range of $2.55-$2.65 per share, compared to the previously anticipated range of $2.10-$2.30 per share. The estimate for the same currently stands at $2.32 per share. General Electric foresees low-teens-digit revenue growth for 2023, as opposed to the low-double-digit growth previously projected. Additionally, the company expects to generate free cash flow in the range of approximately $4.7-$5.1 billion for the current year, an increase from the previously expected range of $4.1-$4.6 billion.
For 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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