As a massive conglomerate, General Electric (GE +1.25%) has its hands in many cookie jars across the globe. For that reason, keeping track of what the company is up to can be quite difficult -- yet also quite interesting. GE released its third-quarter results today, and its stock price jumped 4% in early trading on the back of strong earnings numbers and a positive outlook for both the short and long term. Here's a look at the details and what to expect as General Electric wraps up the year.
By the numbers
General Electric's operating earnings reached $3.8 billion in the third quarter on revenue of $36.2 billion. Operating earnings per share, which investors closely monitor, checked in at $0.38 per share -- a 6% gain over last year's third quarter. Also, of the $7.2 billion cash GE generated through the first three quarters of 2014, $3.8 billion was in the third quarter alone. This cash generation should continue in the months ahead as the company expects to hit its goal of cash flow from operating activities of between $14 billion and $17 billion for the full year.
While the stock market is full of companies that have a bumpy ride ahead in the short term yet a positive outlook in the long term, GE has good outlooks for both.
Short term
According to GE, new technologies were the driving force behind a 31% increase in equipment orders in the third quarter. Service orders also rose 10% and total orders were up by an impressive 22%. Meanwhile, the company's backlog of equipment and services ballooned to a record $250 billion at the end of the third quarter, which was a $21 billion improvement from the same period of 2013.
Graph by author. Information source: General Electric.
Furthermore, GE management expects the company's industrial organic revenue growth will check in at the higher end of its guidance range of between 4% and 7%, for the full year. That means management expects a strong fourth quarter of 2014, which is certainly good news for investors growing increasingly wary of a volatile global economy.
Long term
General Electric's long-term goal of focusing and growing its core industrial businesses, while shedding less profitable and nonrelated operations, is showing positive signs.
In late July, GE sold off part of its North American financial business via the Synchrony IPO. GE has also made plans to sell off its appliance business, all while making the company's largest acquisition in history to purchase part of France's Alstom and further bolster its industrial business.
The company's industrial segment profit rose 9% in the third quarter and has grown 10% throughout 2014. GE continues to prove it can maximize its top-line growth by bringing more cash to the bottom line: Industrial segment margins rose 90 basis points from 15.4%, during last year's third quarter, to 16.3% in third-quarter 2014.
As GE capitalizes on its rising orders and enormous backlog, along with focusing on margin expansion for its core industrial businesses, investors can rest assured the company will continue to return value to shareholders. The conglomerate dished out $8.4 billion to shareholders through the first three quarters of 2014, split between $6.6 billion of dividend payouts and $1.8 billion of stock buybacks.
Given GE's current execution, along with its short- and long-term prospects, today's stock price jump of 4% is justified. Investors should be quite happy to be holding shares of this massive conglomerate.
