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Inside General Electric’s Transportation Revenue in 1Q17


Apr. 27 2017, Updated 9:36 a.m. ET

General Electric’s Transportation revenue

In this part of the series, we’ll review the performance of General Electric’s (GE) Transportation segment in 1Q17. That quarter, Transportation revenue rose to $1.0 billion, from $981.0 million in 1Q16. That implies a year-over-year rise of 6.0%.

However, the segmental operating profit fell to $156.0 million, a 5.0% fall from $164.0 million a year ago. The operating margin was 15.0% in 1Q17, a fall of 170 basis points from the corresponding period of 2016.

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Transportation orders in 1Q17

Orders for the Transportation segment were $1.1 billion in 1Q17. On a year-over-year basis, it was an impressive rise of 70.0%. Equipment orders were $526.0 million, indicating a yearly rise of 500.0% in value. Of the 37 locomotive orders, 24 orders pertain to North America. Mining equipment orders rose 37.0% in 1Q17 to 115, from 84 in the first quarter of 2016.

In the transportation space, General Electric entered into an agreement with DB Cargo to digitize 250 non-GE locomotives with the Predix platform. The company also won orders for 22 Tier 4 locomotives from its Class I North American customer.

Management insights

Total North American carloads rose 4.4% in 1Q17. The bifurcation reveals that intermodal traffic rose 2.2%, while carloads rose 6.6%. The positive sign came from coal, where carloads rose 15.0% in 1Q17 compared to 1Q16. GE’s in-store locomotives fell 24.0% compared to 1Q16 and fell 11.0% sequentially in 1Q17. These factors are essentially signs of a transportation recovery, but momentum remains questionable.

ETF investment 

GE is the topmost holding of the Industrial Select Sector SPDR ETF (XLI). Investors interested in indirect exposure to industrial companies can consider XLI. 3M (MMM), Boeing (BA), and Honeywell International (HON) are also included in XLI’s top holdings.

Next, let’s look at GE’s Energy Connections and Lighting segment in 1Q17.


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