Struggling Power segment
Wall Street analysts expect General Electric’s (GE) Power segment to continue underperforming and to report a massive fall in fourth-quarter revenue. The segment’s revenue is expected to fall 25% YoY (year-over-year) to $7.07 billion from the $9.42 billion it reported in the same quarter of the previous year.
In the third quarter, the segment generated revenue of $5.7 billion, down 33% from the previous year’s quarter and a miss on analysts’ projection of $6 billion. As a result, the segment reported an operating loss of $631 million compared to its operating profit of $464 million in the previous year’s quarter.
Once GE’s main growth engine, the Power segment has been underperforming for the past several quarters as growing demand for renewables and energy-efficient alternatives has eroded demand for fossil fuels. The segment’s performance is dependent on the gas and coal turbine market.
The segment’s acquisition of Alstom Energy in 2015 added to its woes. At the time of the deal, GE justified the purchase by saying the buyout would boost its portfolio and expand its existing offerings in gas power and services. Additionally, the company pointed to cross-selling and cost benefits from the transaction.
On the contrary, some big natural gas–fired power plant builders, including Dominion Energy (D) and Vistra Energy (VST), are lowering their dependence on fossil fuel–based power plants and moving to renewable resources.
GE’s CEO, Larry Culp, has undertaken several initiatives over the last few months, including splitting the segment into two different business units and implementing a management reshuffle to revamp the ailing Power segment. However, his efforts are still at a very early stage and will take a few quarters to be reflected in the company’s financial results.