General Electric Company (NYSE:GE) Q2 2017 Earnings Conference Call Transcript

Jul 21, 2017 • 08:30 am ET

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General Electric Company (NYSE:GE) Q2 2017 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good day, ladies and gentlemen, and welcome to the GE Second Quarter 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. My name is Jason, 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.

Executive
Matthew G. Cribbins

Good morning, everyone, and welcome to GE second quarter 2017 earnings call. With us today are our Chairman and CEO, Jeff Immelt; our next Chairman and CEO, John Flannery; and GE Vice Chairman and CFO, Jeff Bornstein.

Before we start, I would like to remind you that our earnings release, presentation and supplemental have been available since earlier today on our website at www.ge.com/investor.

(Forward-Looking Cautionary Statements)

And now I'll turn the call over to Jeff Immelt.

Executive
Jeffrey R. Immelt

Thanks, Matt. GE had a solid quarter in a volatile world. Let me give you a few themes that describe the environment. The U.S. is stable at a slow growth rate. Global growth is accelerating, but resource markets remain challenging. Our top line results are solid. In the second quarter, our organic results were orders up 5%, revenue up 2%, margins expanded by 10 basis points and industrial profit grew by 4%. At the half, orders were up 6%, revenues up 4%, margins expanded by 70 basis points and industrial profit grew by 11%. At the half, we reduced structural cost by $670 million ahead of plan. We generated $3.5 billion of cash in the quarter, in line with our expectations.

In the quarter, we made progress on our portfolio strategy. In July, we closed GE Baker Hughes. This move significantly strengthens our position in the sector. This is a more competitive business and positioned for growth. We closed LM, a critical vertical integration move for our wind business. LM is already improving growth and margin.

We remain on track to close the sale of water in the third quarter and Industrial Solutions by year-end. And we see good strategic and operational synergy with Alstom. Overall, we have no change to our 2017 framework. John will update you on his views for 2018 and beyond later in the year. Our orders have been strong, up 8% year-to-date and 6% in the quarter. We saw strength in both equipment and service. We grew backlog by $3 billion. We continue to see pricing pressure in Oil & Gas where we have slow industry with excess capacity.

Let me give you a few order highlights that we consider most noteworthy. Aviation was up 14%, really an amazing performance. At the Paris Air Show, we announced $30 billion of commitments, 10x our nearest competitor. Oil & Gas equipment orders grew by 50%. This includes one of the few big project deals in the industry with Eni in Mozambique. Renewables were up 12% behind some big global deals. We're gaining share in Europe. We took orders for