Why GE Earnings Miss the Mark

When General Electric Co. (NYSE: GE) reported its third-quarter financial results before the markets opened on Friday, it said that it had $0.32 in earnings per share (EPS) and $29.27 billion in revenue. The consensus estimates from Thomson Reuters had called for $0.32 in EPS and revenue of $29.64 billion. The same period of last year reportedly had $0.29 and $27.95 billion in revenue.

Orders during this quarter totaled $26.9 billion, a 16% gain from 2015. This number consists of $13.9 billion in equipment and $13.0 billion in services.

Backlog grew 18% to $319 billion, which is comprised of $85 billion in equipment and $234 billion in services.

At the end of this quarter, the company returned about $25 billion to shareholders year to date. About $18.1 billion was returned through share repurchases while the remainder was dividends.

On the books, GE cash and marketable securities totaled $98.9 billion at the end of the quarter, down from $102.5 billion at the end of 2015.

Chairman and CEO Jeff Immelt commented:

Our strength as a diverse, Digital Industrial company continues to enable us to deliver in a slow growth, volatile environment. This quarter, our teams earned $0.32 of earnings per share with strong performance in Power, Renewable Energy, Aviation, and Healthcare.

He added:

GE’s portfolio transformation is bringing real returns to investors. The GE Capital asset sales are substantially complete. We are returning cash to investors while making investments in the future of the company, including acquisitions in digital, additive manufacturing and renewable energy. Our acquisition of Alstom’s power and grid businesses are contributing to our growth. We are investing for the future and executing our Digital Industrial strategy for customers and investors.

Shares of GE closed Thursday at $29.07, with a consensus analyst price target of $32.47 and a 52-week trading range of $27.10 to $33.00. Following the release of the earnings report, the stock dropped 1.5% to $28.62 in early trading indications Friday.

Right after the earnings report, Merrill Lynch issued a call on GE that maintained a Buy rating with a $37 price objective.