GE Aerospace (GE)

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3 Reasons the Latest Earnings Report Was Encouraging for GE Stock

By Larry Ramer, InvestorPlace Contributor May 7, 2019, 9:19 am EDT

https://investorplace.com/2019/05/3-reasons-the-latest-earnings-report-was-encouraging-for-ge-stock/

With the "Power" sector on the mend, GE stock looks better and better...

The first-quarter results for General Electric (NYSE:GE), reported late last month, were rather positive for the company’s longer-term outlook. Its largest division, Power, which has been troubled, showed further signs of “green shoots,” while the owners of GE stock should be pretty upbeat about the company’s overall Q1 results and financial position.

Meanwhile, the most prominent bear on General Electric apparently couldn’t find anything too horrible to say about the company’s results and outlook. Furthermore, another analyst was extremely bullish about the results and GE stock.

Here are my three main takeaways from GE’s Q1 results.

Power Continuing to Show Green Shoots

The company’s extremely important Power unit, which had been written off as dead by many pundits, continued to show “green shoots,” i.e., signs that it’s beginning to turn the corner. Given the segment’s results, one could even argue that it tremendously improved, although the company said that the unit’s numbers were boosted by the favorable timing of deals.

Still, the value of the unit’s organic orders, i.e. its orders excluding acquisitions and divestments of units, rose 14% year-over-year, while its sales fell only 4% YoY. That compares with a 19% YoY decline in orders in Q4 and a 25% YoY plunge in revenue.

The revenue of Gas Power, one of Power’s supposedly troubled businesses, fell only 5% YoY, surpassing GE’s target, and its orders surged 24%. The top line of the company’s oil and gas businesses jumped 8% organically, while its orders surged 8%. GE Capital is expected to lose $500 million-$800 million this year, but it’s projected to break even by 2021.

Perhaps most impressively and importantly for General Electric, the unit’s backlog rose $1 billion versus the previous quarter. Finally, although the unit’s operating profit dropped 71%, partly due to GE’s sales of parts of the business, the fact that the segment generated operating profit of $80 million should be encouraging for the owners of GE stock.