GE’s Power segment
After its Alstom acquisition, General Electric’s (GE) Power (XOP) segment became its largest business unit. This segment accounts for ~28% of the company’s industrial revenues of $31.2 billion before corporate eliminations in 4Q16.
The company reported Power revenues, including Alstom revenues, of $8.5 billion in 4Q16, a 20% rise over 4Q15. The Power business’ operating profit was $2.0 billion, up 27% in 4Q16 on a year-over-year basis.
GE’s organic Power segment growth
Even though the Alstom integration is well on its way, GE specifically mentioned in its earnings announcement that its failure to close certain big power deals in 4Q16. The total Power segment orders rose 16% to $11.1 billion, including $2.8 billion in Alstom orders, in 4Q16. Excluding the Alstom Power segment, revenues grew 15% with the shipment of nine H turbines.
Including Alstom, the organic orders in 4Q16 rose 14%. However, the core GE orders totaled $8.3 billion, a decline of 4%. The Alstom orders were up 160% organically in 4Q16. The segment’s order growth was due to its strengths in the Middle East, African, and Indian markets.
GE’s core equipment orders of $3.3 billion were down 28% on lower gas turbines at 22 against the previous 55 per year. As far the backlog is concerned, the core GE backlog grew 8% while Alstom witnessed an 18% rise in the backlog to $18.3 billion.
GE’s Power segment outlook
In spite of the oil and gas slowdown, GE’s management is confident based on expectations of an upturn in power generation products in 2017. It expects double-digit earnings growth in the Power segment in 2017.
GE company has more than 33 H-class gas turbines in backlog plus orders for 50 inceptions to date. GE is expected to ship six gas turbines in the first half of 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 9% and Duke Energy (DUK) and Southern Company (SO) at 8% and 7.8%, respectively.
Did GE fly high on its Aviation revenues in 4Q16? We’ll discuss this segment in the next article.