Why General Electric Posted Disappointing Q4 Earnings, Revenues

Print Email

General Electric Co. (NYSE: GE) reported fourth-quarter and full-year 2016 results before markets opened Friday morning. For the quarter, the conglomerate reported diluted net earnings per share (EPS) of $0.39 on revenues of $33.09 billion. In the same period a year ago, GE reported EPS of $0.64 on revenues of $33.89 billion. Fourth-quarter results also compare to the consensus estimates for EPS of $0.46 on revenues of $33.63 billion.

For the full year, GE reported EPS of $0.89 and revenues of $123.69 billion, compared with a year-ago loss of $0.61 per share and revenues of $117.39 billion. Analysts had estimated full-year EPS at $1.49 on revenues of $124.33 billion.

On the company’s and analysts’ preferred basis of comparison, industrial operating and verticals, earnings rose 36%, from $2.57 billion in the fourth quarter of 2015 to $3.48 billion, and adjusted EPS dipped from $0.52 to $0.46. For the full year, these earnings rose from $1.66 billion in 2015 to $9.13 billion and adjusted EPS rose from $1.31 to $1.49. Last year’s totals included big write-downs for the company’s divestments of portions of GE Capital into what became Synchrony Financial (NYSE: SYF).

Revenues in the oil and gas segment were down 22% year over year in the quarter from $4.36 billion to $3.40 billion. Energy connections revenue fell 29% to $3.33 billion and renewable energy revenues were up 29% to $2.50 billion.

GE also noted that its backlog during the quarter rose 2% year over year to $321 billion. Of that total, $237 billion is services backlog and $84 billion is equipment.

CEO Jeff Immelt said:

We executed on our 2016 goals and continued to drive growth across our businesses through the GE Store while investing in additive manufacturing and digital technology. We delivered $1.49 of earnings per share this year and 1% of organic growth. We reported $32.6 billion of free cash flow and dispositions and returned $30.5 billion to shareowners through dividends and buyback. We will continue to invest in the Industrial Internet to lead in productivity and performance for our customers in 2017.

In a presentation accompanying the financial release, GE reported that it expects 2017 adjusted EPS in the range of $1.60 to $1.70. Estimated free cash flow and dispositions are forecast in a range of $16 billion to $20 billion. GE also expects to return dividends totaling approximately $8 billion and buybacks totaling $11 billion to $13 billion in 2017.

Analysts have estimated first-quarter EPS of $0.29 on revenues of $27.36 billion. For the 2017 fiscal year, the current consensus calls for EPS of $1.66 on revenues of $126.2 billion.

Shares traded down about 1.4% in Friday’s premarket session, at $30.79 in a 52-week range of $27.10 to $33.00. The 12-month consensus price target was $34.27 before results were announced.