General Electric Company (NYSE:GE) Q1 2018 Earnings Conference Call Transcript

Apr 20, 2018 • 08:30 am ET

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General Electric Company (NYSE:GE) Q1 2018 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good day, ladies and gentlemen, and welcome to the General Electric First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. My name is Jason, and I'll 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
Matt Cribbins

Good morning, and welcome to today's webcast. I'm joined by our Chairman and CEO, John Flannery; and our CFO, Jamie Miller.

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

(Forward-Looking Cautionary Statements)

And now I will turn the call over to John Flannery.

Executive
John Flannery

Great. Thanks, Matt. In my letter to shareholders, I spoke of our path forward. We're taking what we learned in 2017, recommitting to the fundamentals and dedicating 2018 to earning back your trust and delivering for you.

Today is our first report card for 2018, and we see signs of progress. At a critical time, I'm extremely proud of the team's intense effort and execution focus during the first quarter.

Adjusted EPS of $0.16 was up 14%. Industrial had a strong quarter, delivering $0.18, up 29%, with strong performances in Aviation, in Healthcare, in Renewables, in Transportation and higher cost-out in corporate. This is partly offset by lower Power, Oil & Gas and GE Capital earnings.

Free cash flow was about what we were expecting. It was a $1.7 billion use but, importantly, a $1.1 billion improvement over the first quarter of 2017. We continue to make progress on cash. The team is intensely focused and cash sits front and center in every conversation. We see it in our results both in the fourth quarter of last year and in the first quarter.

Power continues to be our biggest challenge. The team is making good progress on execution, but the market is challenging. And as we've said before, this will be a multiyear fix. We are confident we'll exceed our 2018 goal of $2 billion plus of structural cost-out. We delivered $800 million in the first quarter, which helped to increase the industrial margin rate 60 basis points.

We've been working for several years to resolve our WMC-related exposures. As we publicly disclosed in December of 2015, the DOJ started a FIRREA investigation. In the first quarter, we booked a related reserve for $1.5 billion for WMC.

Last November, we announced our intention to divest $20 billion of assets over the next one to two years. We're making progress on these dispositions. Industrial Solutions will close in the second quarter and Value-Based Care in the early third quarter. In addition, we're in active discussions on multiple smaller Aviation platforms, Current & Lighting, Distributed Power and Transportation.

We've got a lot to execute on, but the first quarter was a good start to executing on our 2018