GE Bulks Up: Fool by Numbers

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On Jan. 19, anything-and-everything conglomerate General Electric (NYSE: GE) released fourth-quarter earnings for the 2006 fiscal year, a period that ended Dec. 31.

• Earnings growth looks great -- until you remove the effect of discontinued operations from both reporting periods. On an apples-to-apples basis, earnings per share increased a more modest $0.08 from last year's $0.56 of income per share from continuing operations.
• The balance sheet and cash flow figures discount the GECS financial services arm, as those huge numbers would overwhelm the results from other operations and make the conglomerate look like a bank. Including GECS, GE had $62 billion of cash on hand, $334 billion in receivables, and $433 billion of borrowed money.
• For General Electric, discontinued operations are more a way of life than a one-time adjustment. The company is looking for buyers for its plastics segment and exploring acquisition opportunities in other areas like oil and gas, aviation, and health care -- including a just-announced $8.1 billion deal to buy the diagnostics business of Abbott Labs (NYSE: ABT).

(Figures in millions, except per-share data)

Income Statement Highlights

	Q4 2006	Q4 2005	Change
Sales	$44,621	$40,282	10.8%
Net Profit	$6,576	$3,163	107.9%
EPS	$0.64	$0.30	113.3%
Diluted Shares	10,326	10,563	(2.2%)

Get back to basics with a look at the income statement.

Margin Checkup

	Q4 2006	Q4 2005	Change*
Gross Margin	33.7%	31.8%	1.9
Operating Margin	16.9%	17.0%	(0.1)
Net Margin	14.7%	7.9%	6.9

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Management Effectiveness

	Q4 2006	Q4 2005	Change*
Return on Average Assets	6.0%	3.0%	3.0
Return on Average Equity	23.5%	11.4%	12.1

*Expressed in percentage points.

See how management puts its financial tools to work.

Balance Sheet Highlights

Assets	Q4 2006	Q4 2005	Change
Cash + ST Invest.	$4,800	$2,500	92.0%
Accounts Rec.	$14,300	$15,100	(5.3%)
Inventory	$11,300	$10,315	9.5%

Liabilities	Q4 2006	Q4 2005	Change
Borrowings	$11,300	$10,200	10.8%

Learn the ways of the balance sheet.

Cash Flow Highlights

	FY 2006	FY 2005	Change
Cash From Ops.	$14,780	$13,793	7.2%

Find out why Fools always follow the money.

Related Companies:

• Walt Disney (NYSE: DIS)
• Affymetrix (Nasdaq: AFFX)
• Agilent Technologies (NYSE: A)
• Caterpillar (NYSE: CAT)
• Eastman Chemical (NYSE: EMN)

Related Foolishness:

• New-Wave Managers: Jack Welch of GE
• Foolish Forecast: Go, GE, Go
• Turn Every Dollar Into $100
• Foolish Fundamentals: Return on Invested Capital

Disney is a Motley Fool Stock Advisor pick, and Affymetrix is an official Rule Breaker. Read up on GE's competition with a free 30-day trial to either service, or both.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund was a Disney shareholder but had no other position in any company mentioned. Fool rules are here.