GE’s Energy Connections and Lighting: Its 1Q17 Revenue Slump

Recently, General Electric (GE) announced its exit from the consumer lighting business. The proceeds of the sale are expected to be ~$500.0 million, according to The Wall Street Journal. This business forms part of GE’s Energy Connections and Lighting segment, which has witnessed negative revenue growth.

Segmental revenue in 1Q17 was $2.7 billion, a fall of 35.0% from $4.2 billion a year ago. However, revenue for the Energy Connections and Lighting segment rose 1.0% and reported 4.0% organic growth in 1Q17. Against $2.7 billion in total revenue, Energy Connections and Lighting’s operating profit was a mere $28.0 million, a 10.0% fall year-over-year, indicating a huge operating cost pressure for that segment.

Total orders for GE’s Energy Connections and Lighting segment were $2.6 billion in 1Q17, a 2.0% fall. Orders of $2.4 billion represented a double-digit fall of 12.0%. In the Energy Connections vertical, power conversion orders fell 36.0%, while grid orders fell 8.0% in 1Q17. In the corresponding period last year, a large inverter order boosted power conversion orders. These were positively compensated by an 11.0% rise in industrial solutions orders.

The 2017 outlook for the Energy Connections and Lighting segment as a whole hasn’t changed. General Electric (GE) foresees refined execution from the segment’s business line in the current fiscal year. GE also aims for a double-digit profit growth in this division. As for the consumer lighting business exit, GE anticipates the sale of the industrial solutions business in the second half of 2017.

Investors interested in exposure to large-cap companies can opt for the SPDR S&P 500 ETF (SPY). General Electric forms 1.3% of the portfolio holdings of SPY. Other big industrial names in SPY are Berkshire Hathaway (BRK-B), 3M (MMM), and Boeing (BA).

In the next part of this series, we’ll look at GE Capital in 1Q17.