The Real Numbers Behind GE's "Beat": Organic Orders -16%; Power -27%; Equipment Orders -30%; Aviation -37%

Tyler Durden's picture

On the surface, this morning's GE non-GAAP results (defined as follows: "Non-GAAP results excluding acquired Alstom businesses, non-operating pension costs, gains and restructuring & other charges") were spun as very bullish, with extensively adjusted revenues of $33.5 billion rising 15% and beating expectations of $31.4 billion, while non-GAAP EPS surged 65% to $0.51, well above the $0.46 expected.


Bloomberg immediately praised the result:

General Electric Co. reported second-quarter profit that beat analysts’ estimates as surging sales in energy units helped the industrial giant counter the impact of a sluggish economy.


Adjusted earnings rose to 51 cents a share, boosted by higher profits in the power and renewable energy divisions, GE said in a statement Friday. That exceeded the 46-cent average of analysts’ estimates compiled by Bloomberg. Sales of $33.3 billion compared with $31.9 billion expected by analysts.


“The diversity and scale of our portfolio enabled the company to perform well despite a volatile and slow-growth economy,” Chief Executive Officer Jeffrey Immelt said in the statement. “We expect strong organic growth in the second half of the year.”

What was less, if at all, noted is that any comparisons to prior periods were apples to oranges, as the entire upside contribution came not only from transaction "gains", which added $3.1 billion to the top line, and restructuring charges but all the inclusion of the recently acquired Alstom.

Read the following as you keep the following assessment from Bloomberg in mind:

"GE is betting on markets such as energy and aviation to help it overcome economic malaise and global uncertainty highlighted by the U.K. vote to leave the European Union. Immelt has sold finance and consumer-focused operations while investing in equipment manufacturing and building a complementary software business."

So for those curious how the increasingly industrial firm's organic operations, and especially the abovementioned energy "and avation" held up in the quarter when excluding the contributions from M&A, GE pointed out that excluding Alstom; organic orders - those attributable solely to GE's core ops - crashed by -16% organic while industrial operating margins went nowhere, and stayed flat. Even including Alstom, overall orders declined by 2% from $27.1 billion to $26.6 billion, driven by a plunge in equipment orders from $14.5 to $12.9 billion, hinting just how troubled the global manufacturing sector remains.


But the real surprise was in GE's core-core operations, whose breakdown we had to dig deep inside the presentation to find. It was, in a word, a disaster. Here is the breakdown:

  • Organic equipment, driven by market pressure in oil-and-gas and transportation, plunged 30%. 
  • Power tumbled 27%
  • And perhaps most disturbing was Aviation, despite strong prior results, crashed 37%

And that, in a nutshell, is how a company whose core lines of business are getting crushed, not only reported a 65% surge in "earnings", but crushed expectations.

Source: GE

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Ban KKiller's picture

How many times have I said honest accounting is dead? Yep, more than once.

Paging Arthur Anderson! 


ENRON anyone?

DeadFred's picture

But will they pay any taxes this year? Sometimes it's good to spin the story to the positive and othertimes it's good to look poor as a churchmouse. Thank God for accounting!

venturen's picture

Andersen was just ahead of their time!

PlayMoney's picture

Article Translation......BTFD

wildbad's picture

with gains like these who needs losses?

VonPumperDic's picture



Denial is not a river in Egypt and they still have this to learn.....

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Jul 22, 2016 7:57 AM

They could always just buy more companies to distort their current period's earnings from the prior year.  Worked in the past for them.

GunnerySgtHartman's picture

These guys give political spin doctors a run for the money.

Catullus's picture

CapEx depression.

jerry_theking_lawler's picture

=bleak future


Is this equivalent to the 'eating the seedcorn' phase??

Aaaarghh's picture

more fool the investors wanting to invest in such shenanigans


Moe Howard's picture

GE, even being in bed with the FedGov from day one of the ObaMao Regime can't keep it profitable.


Things in the world must be much worse than we think if the Numero Uno crony capitalist gang is sinking.

Grandad Grumps's picture

And even this is not a fundamental analysis, since dollar sales without accounting for currency and unit sales are really meaningless. Dollar sales mean nothing if commodity costs of production are way down. Or is assumed that price remains constant under varying cost conditions? Pretty bad assumption if you ask me... a skimming analysis, not in-depth and valuable.

SillySalesmanQuestion's picture

Yup. Those Non Existent, Grossly Abandoned Accounting Practices sure do pretty up a disastrous balance sheet.

Bill of Rights's picture

Perpetual growth fake or otherwise. The funny thing is they feel this will continue forever lol.

Joe A's picture

Since GE is also one of the world biggest provider of military stuff the question is "what difference does it make?". How is that sector of GE doing? Badly? Then expect a new war somewhere.

Colonel Klink's picture

I avoid buying anything GE.  Fuck'em!

reader2010's picture

Dont worry. The Chinese will buy GE after they have finished buying up all available commerical RE.

Mr. Bones's picture

I can understand nonGAAP as an opportunity to explain why this quarter or that "wasn't really that bad" which could be entirely within ethical boundaries.

However, I don't see how an educated investor, armed with the GAAP portion of this report could conclude that this is a massive beat.  It demonstrates that a multi-sector hegemon is experiencing weakness in markets it should dominate.  If this was a trend across multiple sector participants or reporting periods it could indicate deeper, more dire problems.

tl;dr - what kind of Muppet that wants to keep their money behaves in this way?  Is this just greater fool seeking momo games?

Jethro Dull's picture

Maybe, see what I said above. They have some great opportunities around the corner. They just have to get there.

Are they going to bleed out before they turn that corner? They have some technologies out there that could help turn things around in America.

Problem is lack of demand may take them out before the technologies can be implented to give the country a boost.

Ying meet Yang.

To Hell In A Handbasket's picture

Lies, all lies. The three hundred thousand new cleaning jobs shows this downturn is specific to GE and nobody else. The economy is booming and perpetual growth in a limited world, is the minimum target in corporate world. PS: Don't mention Caterpillar. God bless the USSA! A country built on lies, delusion and make-believe. LETS MAKE AMERICA GREAT AGAIN!

reader2010's picture

at this point in time the only route that's left to "Make America Great Again" is the forced labor concentration camps for the big money. it's gonna happen one way or the other.

Professor Know Nothing's picture

As with everything else in this market, it doesn't matter until it does.

Cardinal Fang's picture

They just believe their own bullshit, concentrate on their core business because China is gonna buy all their shit.

Except they're not.

And you can't stop or turn a ship on a dime.

That bullshit probably sounded good on Mahogany Row 3 years ago.

Not so good now.

bigkahuna's picture

um, securities fraud?

Phillyguy's picture

Over the last decade, GE received over $27 billion of orders from the Pentagon (

GE pays little if any federal or state income tax.

The Chief's picture

About GE- this is what one oilman in Texas once said to me:

"They fuck you when business is good, and fuck you even harder when business is bad."

Ajax_USB_Port_Repair_Service_'s picture

Send GE's accountants to Italy! Maybe they can find an easy fix for the NPL problems.

Manipulism's picture

Jimmy Dore spitted Alex in the face.


Jethro Dull's picture

Didn't they drop around a billion of their own dime on the next generation fighter engine? It's a game changer. Pratt will have one as well. But, they finished first didn't they? The F-35 will a have an engine that actually gives it "better" performance. It can be sized for other aircraft as well.

They will sell lots of CF-6 commercial aircraft engines derivatives for peaker and combined cycle natural gas plants. We are stuck putting in combined cycle and peakers plants to cover the shutdown of coal and nuclear already in the works, from, the greening of our nation by Obama.

And, they will sell lots of nuclear componets as we start to build  out nuclear again.

Problem is do the lights go out at GE, just like they will in America, before we turn the corner on this intentionally inflicted disaster on our nation?


Trogdor's picture

All they're sayin' is: ..."looking to the future, WWIII will be very good for the #1 military contractor on the planet." (.. c'mon WWIII!)