General Electric Co. (GE) is a global industrial company that provides power generation, renewable energy, industrial aviation products, and healthcare products and services. The company also offers financial products and services. GE serves customers in more than 170 countries and has manufacturing and service operations globally.
GE operates in industries that require continual investment in research and development. Major competitors include Honeywell International Inc. (HON), 3M Co. (MMM), German-based Siemens AG (SIEGY), and France-based Schneider Electric SE (SBGSF).
- GE provides aviation, power, renewable energy, healthcare, and financial products and services.
- Aviation generates the most revenue, but healthcare generates the most profit.
- GE is focusing on its core industrial businesses, and continues to shrink the size of its once-major financial services business.
- The company will sell its Capital Aviation Services business to AerCap Holdings NV in a deal valued at $30 billion.
GE announced in late January results for Q4 of its 2020 fiscal year (FY), which ended Dec. 31, 2020. Net earnings rose 266.2% to $2.6 billion, but revenue fell 16.4% to $21.9 billion. Net earnings were boosted mainly by lower costs and expenses, higher other income, and lower provision for income taxes compared to the year-ago quarter.
GE's total segment profit, which includes all profits from the company's business segments, fell 52.5% to $1.6 billion in Q4 2020. This profitability metric is used by GE for each business segment. The metric excludes interest and other financial charges, non-operating benefit costs, income taxes, and preferred stock dividends for the company's four industrial segments. However, these items are included when calculating segment profit for the financial segment. The industrial segment profit calculation also includes other income.
GE said that it significantly improved its profitability and cash performance despite the challenging macroeconomic environment created by the COVID-19 pandemic. The company also highlighted that it had made important steps in the growth of its renewable energy business in 2020. It supplied the first purpose-built hydrogen-burning power plant in the U.S., and secured the first order for its Haliade-X offshore wind turbine.
GE's Business Segments
GE operates through four industrial segments and a financial segment. Its four industrial segments are Power, Renewable Energy, Aviation, and Healthcare. Its financial segment is named Capital. GE provides a breakdown of segment profit and revenue for each of these business segments. Any negative revenue or segment profit is excluded from the pie charts above.
The Power segment provides products and services related to energy production. Its products and technologies utilize oil, gas, fossil, diesel, nuclear, and water to produce electric power. This GE segment offers gas and steam turbines, and a full balance of plant, upgrade and service solutions.
The Power segment's profit rose 3.0% to $306 million in Q4 2020, comprising nearly 17% of total segment profits. Revenue was essentially flat, slipping 0.3% to $5.4 billion. It comprised more than 24% of total revenue.
The Renewable Energy segment offers end-to-end solutions for customers. It provides onshore and offshore wind, blades, hydro, storage, solar, and grid solutions, as well as hybrid renewables and digital services.
The Renewable Energy segment narrowed its loss to $87 million in Q4 2020 from $227 million in the year-ago quarter. Revenue for the segment fell 6.4% to $4.4 billion, comprising nearly 20% of GE's total revenue.
The Aviation segment designs and produces commercial and military aircraft engines, integrated engine components, electric power, and mechanical aircraft systems. It also provides aftermarket services to support its products.
The Aviation segment's profit fell 72.5% to $564 million in Q4 2020, comprising about 31% of total segment profits. Quarterly revenue declined 34.6% to $5.8 billion, accounting for more than 26% of the company's total revenue.
The Healthcare segment sells sophisticated healthcare products and technologies. It has expertise in medical imaging, digital solutions, patient monitoring and diagnostics, drug discovery, and performance improvement. In 2020, the segment experienced increased demand for certain types of products and services, including ventilators, monitoring solutions, x-ray, anesthesia, and point-of-care ultrasound product lines. The segment's products and services are primarily sold to hospitals and medical facilities worldwide.
The Healthcare segment's profit fell 16.6% to $949 million in Q4 2020, accounting for over 52% of total segment profits. Revenue for the quarter declined 10.7% to $4.8 billion, comprising almost 22% of total revenue.
The Capital segment provides financial products and services with a focus on customers and markets aligned with the company's industrial businesses. It offers leases, sale-leasebacks, asset trading and servicing, underwriting, working capital, insurance, and other financial products and services.
The Capital segment reported a segment loss of $151 million in Q4 2020 compared to a segment profit of $69 million in the year-ago quarter. Revenue declined 14.3% to $1.8 billion, accounting for about 8% of total revenue for the company.
GE's Recent Developments
On March 10, 2021, GE announced that it agreed to combine its GE Capital Aviation Services business (GECAS) with Ireland-based AerCap Holdings NV (AER) in a deal valued at over $30 billion. The sale signals GE's ongoing shift in focus to its industrial businesses. GE plans to use the proceeds of the transaction to reduce debt. The transaction is expected to close within 9-12 months of the announcement date.