General Electric’s 1Q17 Results Beat Estimates: Stock Fell 2.5%

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Part 4
General Electric’s 1Q17 Results Beat Estimates: Stock Fell 2.5% PART 4 OF 12

How General Electric’s Power Revenue Rose in 1Q17

GE’s Power segment

General Electric’s (GE) Power (XOP) segment is the company’s second-largest business unit in terms of revenue for 1Q17. This segment accounts for 23.4% of GE’s industrial revenue of $26.0 billion before corporate eliminations in the reported quarter.

GE reported its Power revenue, including Alstom revenue, of $6.1 billion in 1Q17, a rise of 17.0% over 1Q16. The Power segment’s operating profit was $797.0 million, a 39.0% rise in the reported quarter compared to the corresponding quarter last year. The segment witnessed an operating margin growth of 210 basis points.

How General Electric&#8217;s Power Revenue Rose in 1Q17

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Behind the Power segment growth

Much of the 17.0% growth in the Power segment was fueled by equipment revenue growth of 59.0%, with flat service revenue growth. Equipment revenue rose mainly due to increased deliveries of gas turbines, HRSGs (Heat Recovery Steam Generators), and aero (aeroderivative) gas turbine units. In the first quarter of 2017, General Electric shipped 20 gas turbines compared to 13 in 1Q16.

Total Power segment orders rose 8.0% to $6.1 billion, including a 25.0% rise in equipment orders. However, service orders were flat in 1Q17. The 25.0% rise in equipment orders was driven by a 12.0% rise in gas power systems and a 100.0% rise in steam power systems. But gas turbine orders were 12 units in 1Q17, from 25 units on a year-over-year basis.

GE’s power outlook

With a revival in the oil and gas space, General Electric seems somewhat bullish on the power play. The company aims to improve margins in the power business with a focused cost savings of $500.0 million in 2017. GE’s management is upbeat on organic growth in the Power segment, mainly driven by increased aero gas turbines and higher gas turbine shipments. The company is eyeing ~5.0% organic growth in the Power segment in 2017.

Investing in ETFs

If you’re interested in trading in power and utilities, you can look into the Utilities Select Sector SPDR ETF (XLU). XLU’s major holdings include NextEra Energy (NEE) at 10.0%, Duke Energy (DUK) at 8.6%, and Southern Company (SO) at 8.0%.

Next, let’s look at the prospects for GE’s Oil & Gas segment in the coming quarters.


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