General Electric is a company with lots of moving parts. The manufacturing giant operates seven different industrial segments, and is in the process of divesting the majority of its non-industrial-related financial assets from GE Capital.
With effectively eight major areas for investors to keep tabs on, General Electric's earnings conference call has proven to be a great resource for investors to gain additional insight about the underlying health of the company's various businesses. During GE's most recent first-quarter earnings call, management touched on five areas that investors should focus on.
Continue Reading Below
1. Bucking the trend in oil and gasDespite the challenges that many oil and gas companies have been experiencing thanks to declining oil prices, General Electric's highly diversified oil and gas business seemed to minimize the damage it suffered in the first quarter.
On an organic basis, after adjusting for currency fluctuations, General Electric's oil and gas segment's revenue growth was unchanged year over year, and margins improved by 50 basis points.
Early on during the earnings call, CEO Jeff Immelt summed up the company's oil and gas performance:
The main segments under pressure included service orders, turbo machinery, and equipment orders, which declined by 27%, 23%, and 10%, respectively. The target that Immelt is referring to is General Electric's goal of earning between $1.10 and $1.20 per share in industrial operating earnings this year.
2. Total dominationGeneral Electric's upcoming LEAP jet engine, which was developed at CFM International, a 50-50 joint venture between GE and Snecma, is expected to enter service in 2017. It has already become the fastest-selling engine in aviation history, and one of GE's most successful product launches ever.
Compared to its predecessor, the LEAP engine will be 15% more fuel efficient and is expected to save airlines nearly $3 million per airplane in running costs. These economics are clearly driving LEAP's massive win rate in next-generation single-aisle aircrafts.
On the conference call, Immelt didn't fail to mention this achievement:
3. Margins are running ahead of planOn the industrial side of the business, GE's first-quarter margins ran ahead of the company's 2015 target. This was the result of favorable mix, well-managed costs, and improved productivity across the organization.
During the conference call, Immelt delved into specifics:
4. Industrial cash flowConsidering General Electric has plans to generate 90% of its operating earnings from industrial activities by the end of 2018, it's essential to monitor changes in the total segment's cash flow. Over the long term, consistent cash flow growth will allow management a certain degree of confidence that it can raise its dividend in future periods without dipping into the capital needs of its industrial operations.
Although GE's industrial cash flow declined by 29% year over year to $890 million, Immelt expects it'll improve "substantially" in the second quarter:
5. Market conditions are ripe for GE Capital exit planBetween low interest rates and high stock prices, management believes that its plan to divest the majority of GE Capital's non-industrial financial assets is well-timed with the market environment. Consequently, GE's initial plan to divest these assets by the end of 2016 could be ahead of schedule.
However, when balancing speed with price, there's a lot to consider, according to CFO Jeff Bornstein:
Putting it all togetherIn the first quarter, six of GE's seven industrial segments reported organic revenue growth, suggesting underlying strength in GE's industrial business. All things considered, it appears that General Electric continues to work toward its greater goal of becoming a highly focused -- and diversified -- industrial powerhouse.
The article 5 Things General Electric Company's Management Wants You to Know originally appeared on Fool.com.
Steve Heller has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.