GE releases its 2Q’23 Results

GE released its second quarter financial results today, and I encourage you to read the full materials and listen to our earnings call, at 7:30 AM ET.

Key highlights of GE’s financial performance for the second quarter 2023:

• Total orders $22.0B, +59%; organic orders +58%
• Total revenues (GAAP) $16.7B, +18%; adjusted revenues* $15.9B, +19% organically*
• Profit margin (GAAP) of 8.3%, +1,510 bps; adjusted profit margin* 8.8%, +160 bps organically*
• Continuing EPS (GAAP) of $0.91, +$2.00; adjusted EPS* $0.68, +$0.32
• Cash from Operating Activities (GAAP) $0.3B, $(0.2)B; free cash flow* $0.4B, +$0.2B

GE Chairman and CEO and GE Aerospace CEO H. Lawrence Culp, Jr. said, "GE's second-quarter performance was strong, building on our first-quarter momentum and marking a solid first half of the year. Orders and revenue grew double digits, led by robust services growth across our portfolio, increased demand at GE Aerospace and record Renewable Energy orders. Today, we are raising our full-year guidance as market strength and the lean transformation within our more focused businesses drive significant profit and cash improvement across GE.”

Culp continued, "GE Aerospace is growing rapidly, executing on the ramp for customers and building services strength, while GE Vernova advances toward its spin-off as Renewable Energy improves and Power continues to deliver. Each business has its own critical mission and focus. We’re increasingly operating as GE Aerospace and GE Vernova as we prepare to launch these two independent companies sometime in early 2024.”

Overall, we delivered strong 2Q and 1H results. In 2Q, momentum continued as orders and revenue* both grew double digits organically, underpinned by strong demand at GE Aerospace and record orders in Renewable Energy. We also saw improved profitability and cash, with +160 bps of organic margin* expansion, $0.68 of adjusted EPS*, and $415M of FCF*. Notably, in the first half, adjusted EPS grew >3x year-over-year, already surpassing our full year '22 results.

Looking at our businesses, GE Aerospace is growing rapidly, delivering double-digit growth in orders, revenue, and operating profit year-over-year as we execute on the ramp for customers and strength in services continues. Organic orders growth was +37%, due to both Commercial Services and Defense. Organic revenue* grew +28%, with equipment growing at double the services rate. Profit improved by nearly 30% year-over-year. Commercial Engines and Services was particularly strong with revenue up +32%. Meanwhile, Defense is driving near-term improvement and significant growth - with orders more than doubling and engine output increasing +74% year-over-year.

At GE Vernova, we are advancing towards the spin sometime in early ’24 as Renewable Energy improves and Power continues to deliver. Renewables Energy’s order growth was robust, led by Grid with two large HVDC projects, a large U.S. Offshore wind order, and Onshore Wind continued strength. Revenue grew 27% organically* driven by higher equipment deliveries across Wind and Grid. Additionally, profit improved both year-over-year and sequentially driven by price and productivity, primarily at Onshore and Grid.  At Power, we continue to deliver solid profit growth, margin expansion and reliable cash flow, providing critical support for future growth at GE Vernova.

We also continued to simplify and strengthen the business foundations prior to the launches of GE Aerospace and GE Vernova. This quarter, we monetized ~32% of our stake in GE HealthCare for total proceeds of $2.2B. Today, we also announced that we plan to redeem all outstanding shares of GE preferred stock in September. In addition, we simplified legacy liabilities through actions to significantly reduce our exposure to future losses at our run-off mortgage portfolio in Poland (Bank BPH), including approving adoption of a settlement program. In connection with these actions, we recorded an additional charge of $1B in discontinued operations. No incremental cash contributions are required in connection with the charge as the current cash balances at bank BPH are adequate.

Looking ahead, based on first-half performance and continued second-half strength, we’re raising our full-year guidance:

• Organic revenue* growth in the low-double-digit range, up from the high-single-digit range
• $2.10-$2.30 of adjusted EPS*, up from $1.70-$2.00
• A range of $4.1-$4.6B for free cash flow*, up from $3.6-$4.2B

We're increasing our guidance for GE Aerospace and GE Vernova as well. GE Aerospace now expects high teens to 20% organic revenue* growth, $5.6B to $5.9B of operating profit, and free cash flow* up year-over-year. GE Vernova now expects mid-single-digit organic revenue* growth, $(0.4)B to $(0.1)B operating profit and continues to expect flat to slightly improved free cash flow*.

In summary, our businesses are off to a strong start this year, we’re increasingly operating as two independent companies, and we’re confident we’re well-positioned for success as two innovative, service-focused industry leaders. As a reminder, given our final spin is approaching, this will be GE CFO Carolina Dybeck Happe's last earnings call. Personally, I'd like to thank Carolina for all she has done for GE during such a critical time and the support and leadership she has provided to me and our team over the last three and a half years. I’d also like to welcome Rahul Ghai into his additional role as GE CFO, who many of you know well and will see more of this fall.

Thank you for your continued interest in GE.

Best,
Steve & team

*Non-GAAP Financial Measure. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in our quarterly report on Form 10-Q and our second quarter earnings release.

This document contains "forward-looking statements." For details on the uncertainties that may cause our actual future results to be materially different than those expressed in our forward-looking statements, see here.