General Electric Company (NYSE:GE) Q2 2016 Earnings Conference Call - Final Transcript

Jul 22, 2016 • 08:30 am ET


General Electric Company (NYSE:GE) Q2 2016 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen, and welcome to the General Electric Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. My name is Ellen, and I will be your conference coordinator today. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the program over to your host for today's conference, Matt Cribbins, Vice President of Investor Communications. Please proceed.

Matt Cribbins

Good morning, and thanks for joining our second quarter earnings call. Today, I'm joined by our Chairman and CEO, Jeff Immelt; our CFO, Jeff Bornstein; and GE Aviation President and CEO, David Joyce.

Earlier today, we posted a press release, presentation and supplemental on our website at (Forward-Looking Cautionary Statements).

Now with that, I'll turn it over to Jeff Immelt.

Jeff Immelt

Thanks, Matt. GE had a good quarter in a slow growth and volatile environment. I will describe our markets in 2 segments, really. The resource sector remains tough, putting pressure on our Oil & Gas and Transportation businesses. Meanwhile, the rest of our markets have plenty of growth available. The strength of GE is our diversity, and we remain on track for our '16 framework and our bridge to 2018. In the second quarter, our portfolio execution was the real highlight. This includes GE Capital de-designation, the Appliances sale with a substantial gain and the sale of GE Asset Management.

From an operations standpoint, we had EPS of $0.51 and that is growth of 65%. Industrial EPS was up 35% excluding gains from restructuring. Margins were flat ex Alstom and up 10 basis points year-to-date, and we're on track for our margin goals for the year.

Alstom was $0.01 a share in the second quarter, and we're on track to hit our plan in '16. CFOA was $10.7 billion, and we're on track for our CFOA goals for the year. Industrial operating profit and organic revenue growth are down slightly in the first half, consistent with our expectations.

However, we are positioned for strong organic growth in the second half, and we're able to hit our earnings goals despite a $0.03 headwind in foreign exchange year-to-date. Looking forward, we have no change to our framework for the year. We still expect organic revenue growth of 2% to 4%, or strong organic growth in the second half.

We expect margins to expand and Alstom to deliver $0.05 a share. We still expect free cash flow plus dispositions to be $29 billion to $32 billion for the year including a capital dividend of $18 billion. Year-to-date, we've returned $18 billion to investors and we're on track for $26 billion in the year. So despite the macro volatility, we are delivering.

Orders were $27 billion, down 2%, down 16% organically. Alstom orders were $4.5 billion in the quarter and $7.5 billion for the first half. Backlog grew by $4 billion from the first quarter '16 and sit at $320 billion, a record. Core service backlog grew by 11%. Orders pricing