Disappointing 3Q17 Results Force General Electric to Cut Guidance

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Part 4
Disappointing 3Q17 Results Force General Electric to Cut Guidance PART 4 OF 10

What Led the Rise in 3Q17 Revenues for GE’s Aviation Segment?

Aviation segment’s revenues

General Electric’s (GE) Aviation segment was the second-largest contributor to its total Industrial unit’s revenues in 3Q17. This vertical accounted for 22.7% of GE’s $30.0 billion in Industrial revenues in 3Q17. In the reported quarter, GE’s Aviation division’s revenues reached $6.8 billion, up 8.0% from $6.3 billion in 3Q16.

What Led the Rise in 3Q17 Revenues for GE’s Aviation Segment?

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GE’s Aviation segment’s operating income rose 12% to ~$1.7 billion in 3Q17 on a year-over-year basis. Its operating margin expanded slightly to 24.6% in the reported quarter from 23.7% on a year-over-year basis.

The Aviation segment’s equipment revenues fell 5% in 3Q17. This decline was due to reduced shipments of commercial engines of 641 engines against 654 in 3Q16. The rise in LEAP1 engine deliveries offset the fall in legacy engine shipments.

The Aviation vertical shipped 111 LEAP engines, which included 23 Boeing (BA) 1B retrofitted engines. Revenues from military equipment dropped 20% in the quarter. However, service revenues jumped 18% due to more commercial spares in 3Q17.

Aviation orders and backlog

The Aviation segment’s orders jumped 12% to $6.9 billion in 3Q17. The equipment orders rose 8%, and the orders for commercial engines remained unchanged at $1.4 billion. Notably, these orders didn’t cover any of the Paris Air Show announcements.

Avio led a 46% rise in equipment orders while military equipment orders rose 10%. The service orders expanded 13% in 3Q17.

Also, an 11% growth in commercial services on the back of a 21% rise in spares growth at $23.2 million per day led the growth in service orders. Military service orders were up 56% due to increased orders for advanced helicopter programs and advanced combat engines.

Management outlook

General Electric anticipates a robust aviation market (DAL) going forward. According to the company, worldwide passenger revenue passenger kilometers (or RPKs) jumped 7.9% since the beginning of 2017. The International Air Transport Association (or IATA) projects robust growth in its domestic and international routes.

Air freight (JBLU) volumes grew 11% in the first eight months of 2017 from the same period in 2016. The aviation load factors worldwide are anticipated to remain above 80%.

Next, we’ll cover GE’s Oil & Gas segment (UNG) results in 3Q17.

  1. Leading Edge Aviation Propulsion

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