GE Earnings Call Insights to Explore Now
Sustainable Margin Expansion
Scott Davis – Barclays: One of the things when we try to kind of model out margins and sustainable margin expansion going forward. Can you help us understand if there is any way to think about the 70 basis points? How much of that was value gap? How much of that was value gap, how much of that is from past restructuring, any way to kind of carve that up a bit?
Keith S. Sherin – Vice Chairman and CFO: If you look in the third quarter Scott, value gap was about $50 million drag actually in the quarter that was 0.2 of drag. Mix equipment versus services and other mix was about 0.5 of drag, $120 million or so and cost out is the real driver here, it’s over $500 million, that’s 1.4 points of improvement and it’s across the board, it’s lower variable cost, it’s better base cost performance with this volume and it’s simplification effort is starting to kick in, so I think I don’t have it relative to prior restructuring as you asked, but I think that’s a pretty good framework for the third quarter. It’s great that the margins have turned positive here and our expectation is that this margin improvement will continue and the fourth quarter will increase obviously from the third quarter level to get us to our goal of the total year.
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Jeffrey R. Immelt – Chairman and CEO: We still think value gaps got to be positive for the year; it’s been up more than $100 million year-to-date before Q3.
Keith S. Sherin – Vice Chairman and CFO: So for the total year it’ll be slightly positive.
Jeffrey R. Immelt – Chairman and CEO: So for the total year it’ll be positive and I expect it’s going to be positive again in ‘13 as well.
Scott Davis – Barclays: Jeff, going back to your beginning remarks on the macro view, it seems that looking at some of the results from your peers the things have degraded a bit in the last couple of months; when you’re thinking about your planning scenarios for really 2013, so I’m guessing you’re in that process now, what are the — such a wide range of outcomes out there, what are you guys planning for, and how do you – and I don’t know how you want to comment on it whether you dial it down by region and what kind of GDP assumptions or whether you just want to talk about it more subjectively, but what are your plan for I guess?
Jeffrey R. Immelt – Chairman and CEO: Scott, I think you got to have pretty; you got to factor in a number of different scenarios. I think most people are assuming that the fiscal cliff gets resolved in some way and I don’t think we are alone on that one. Then I think just when I look at orders in our growth regions. We’ll have six growth regions that have double digit orders growth for the year six of nine. That’s pretty good Scott, that gives me some comfort when I look at the resource rich and rising Asia. We still see decent opportunities in China. We still see decent opportunities in the Middle East and Latin America, Russia, places like that. Then Europe is going (to be right). Europe’s going to be, we’re not assuming that Europe gets any better. So I think we are kind of looking at ’13 being kind of like ’12 with the big variable being the fiscal cliff and we are ready if it doesn’t go through, we’re kind of I think making the same assessment most people do that somehow gets resolved.
Stephen Tusa – JPMorgan: Energy infrastructure I guess up 10% for the year. What’s the expectation prior to this it seems like that’s, the growth slows pretty materially in the fourth quarter, is that timing around wind or something like that?
Jeffrey R. Immelt – Chairman and CEO: There is another obviously large chunk of revenue in wind in the fourth quarter, and that’s it is a drag on us. I think that’s probably the biggest factor for us, I mean we still expect energy to be up double digit for the year. Year-to-date they’re up about 12% and for the total year they’ll be up about 10 and they’ll be up in the mid-single digits in the fourth quarter here for us.
Stephen Tusa – JPMorgan: So, how does that kind of make you feel heading into next year, I guess outside of wind the trends there. Also I guess you talked about orders pricing being up 8% year-to-date, but it’s going to come in flat, which means you’re going to have a pretty tough orders number – orders pricing number in the fourth quarter. Does that change the views that already you presented at the Investor Day several weeks ago?
Keith S. Sherin – Vice Chairman and CFO: Just to clear up this, 0.08% year-to-date through the third quarter and we’re saying we expected to be flat or slightly positive, so it’s not a big change for the – there is no change in the fourth quarter and that’s our total year estimate that we talked to you Steve. So, I think if you go by business, you got to feel great about oil and gas. We continue to build backlog. Our orders are strong. We have some orders slipped even in the quarter. The outlook is very strong for next year as we head into the fourth quarter. For energy itself, you feel great about the move to gas around the world is certainly helping us in terms of our service outlook, and we got to continue to fight for every order they have in the gas turbine side. We’re going to have – we think we’ll growing megawatts gas turbine sold in the outlook.
Jeffrey R. Immelt – Chairman and CEO: At the end of September, we said power and water would be up in ’12 and flat in ’13, and they would be up really double-digits ex-wind in ’13. I think we still think that’s true.
Keith S. Sherin – Vice Chairman and CFO: Sure, that’s the forecast.
Jeffrey R. Immelt – Chairman and CEO: We think oil and gas would be up double-digits this year and next. We still think that’s true. We think energy management would be up double-digits in ’12 and ’13 and we still think that’s true. So, I think it’s pretty consistent with what we said in the infrastructure day.
Stephen Tusa – JPMorgan: Then in Aviation, the service revenues were only down one, but the service orders were down double digit, and what’s going on in there and is there some timing around the price increase, the pull forwards and some business last year. Can you maybe just talk about what you’re seeing have things stabilized on the spare stuff or maybe just give a quick update there?
Jeffrey R. Immelt – Chairman and CEO: I think spares outlook seems to have stabilized going from in the third quarter — in the second quarter, the spares rate was 20.6%, in the third quarter its 22%, our outlook in the fourth quarter is similar to that. So, right now in the third quarter you’re dealing with the biggest negative variance year-over-year and we’re kind of lapping ourselves on that. Our expectation is that at some point revenue passenger miles are still positive year-over-year, freights down slightly, but at the end of the day with all these flights going on, cycles occurring, there is going to be a pent-up demand for service here and we expect that to be positive for 2013. So, in the fourth quarter we’re not counting on that, we’re counting on the spares orders to be about where they are today and we think that it’ll be positive in ‘13 as I said.
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