GE announced today record second-quarter 2007 earnings from continuing operations of $5.4 billion or $.52 per share, up 12% and 13%, respectively, from second quarter 2006. Revenues from continuing operations were $42.3 billion, up 12%, increasing 8% organically.“Infrastructure and Commercial Finance, which account for 56% of segment profit, led our strong performance this quarter with profit growth of 23% and 18%, respectively,” GE Chairman and CEO Jeff Immelt said. “Global demand for our Infrastructure products and services is unprecedented with double-digit revenue and earnings growth in Oil & Gas, Aviation, Energy, and Transportation. Strong global origination at Commercial Finance contributed to double-digit growth in assets, revenues, and earnings.
“We are building a highly visible and sustainable growth pipeline around the world,” Immelt said. “We are winning with technology and deepening customer relationships through services. Our total orders were up 32% to a record $25 billion, and total backlog grew $18 billion year-over-year, an increase of 42%. Major equipment orders were $13.1 billion, up 54%, and major equipment backlog grew to $44 billion, up 53%. Services orders were up 11%, and our Customer Service Agreement (CSA) backlog stands at $96 billion, up 10%.
“With our strong orders and momentum, we are forecasting third quarter EPS from continuing operations of $.54-.56, up 15-19% over comparable 2006 earnings. We are reaffirming guidance for the full year and are on track to deliver a solid, low-risk performance in 2007 with high visibility to organic growth. We are increasing our 2007 share repurchase program to $14 billion, with the remaining $12 billion to be allocated over the second half of the year. The Board of Directors increased the program, announced in 2004, to $27 billion and accelerated it by a year to be completed by the end of 2007,” Immelt said.
GE delivered its tenth straight quarter of organic revenue growth of 2-3 times global GDP generated by broad-based services and global market demand. Services revenues were up 12% and global revenues grew 21%, with $8.3 billion from developing markets, up 29%.
GE’s segment profit grew 11% and industrial segment operating profit margin increased 70 basis points to 17%. With year-to-date segment operating profit growth of 120 basis points, the company is on track to meet its goal of 100 basis points of margin expansion for the year.
“For the quarter, GE Money had strong global growth in revenues and assets, and increased segment profit 8% despite a loss at its U.S. mortgage business, WMC,” Immelt said. “We have made the decision to exit this business and substantially reduced our exposure by selling $3.7 billion of WMC loans in the quarter.
“NBC Universal grew segment profit 2% with a strong cable, film, and digital performance. Its current operating improvements coupled with a successful upfront provides a solid foundation for future performance,” Immelt said.
“At Healthcare, the impact from the Deficit Reduction Act (DRA) and the continued regulatory suspension on shipments of surgical supplies by our OEC business was greater than expected,” Immelt said. “In the short term, these challenges more than offset strong performances in our other Healthcare businesses. However, the future of this business remains solid.”
In the second quarter, GE realized a $0.5 billion after-tax gain from its nuclear joint venture with Hitachi. At the same time, GE recorded $0.6 billion of restructuring and other charges, including $0.2 billion that was recorded in the GE Money segment. The company’s consolidated tax rate was 17%, consistent with the first quarter of 2007 and in line with expectations.
Second-Quarter 2007 Financial Highlights:
Earnings from continuing operations were a record $5.4 billion, up 12% from $4.8 billion in second quarter 2006. EPS from continuing operations were $.52, up 13% from last year’s $.46. GE’s Infrastructure and Commercial Finance businesses contributed strong double-digit earnings growth for the quarter.
Continuing revenues grew 12% to a record $42.3 billion. GE industrial sales were $24.3 billion, an increase of 10% from second quarter 2006, reflecting core growth and the net effects of acquisitions. Financial services revenues grew 11% over last year to $17.1 billion, primarily reflecting core growth.
Cash generated from GE’s continuing operating activities (CFOA) in the first six months of 2007 totaled $11.6 billion, down 16% from $13.8 billion last year. The decrease was the result of $3.0 billion of lower special dividends from GE Capital Services related to prior year proceeds from sales of insurance holdings, which more than offset an 11% increase from the industrial businesses’ continuing operations.
Discontinued Operations for the second quarter reflected a $21 million profit, down from last year’s $0.1 billion. Effective in second quarter 2007, discontinued operations for all periods presented include the results of our Plastics business, expected to be sold in third quarter 2007, and the results of our former Advanced Materials business for periods prior to its sale in fourth quarter 2006. Accordingly, second quarter net earnings were $5.4 billion ($.53 per share) in 2007 and $4.9 billion ($.48 per share) in 2006.
“We have made significant changes to drive growth across the company and around the world. We have created a faster growing, higher returning set of businesses through smart acquisitions and dispositions. We have diligently executed on our ‘growth as a process’ initiative. We have invested in technology and services to better serve our customers,” Immelt said. "Our financial goals have been clear: consistent, double-digit earnings growth with expanding margins and increasing returns. We have delivered another quarter that meets our goals and reflects the power of our portfolio of leading businesses. We are investing and delivering.”
GE will discuss preliminary second-quarter results on a conference call and Webcast at 8:30 a.m. ET today. Call information is available at www.ge.com/investor, and related charts will be posted there prior to the call.
GE (NYSE: GE) is Imagination at Work -- a diversified technology, media and financial services company focused on solving some of the world’s toughest problems. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and advanced materials, GE serves customers in more than 100 countries and employs more than 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com
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