Over the past few years, General Electric Company (NYSE:GE) has posted robust growth in several business divisions. The company expects to report a strong performance this year as well, especially in the healthcare division. Sales from this division have grown at a CAGR of 4.5% over the last three years. Going forward, based on GE’s strong focus on research and innovation, I expect the company to continue reporting consistent growth. Below is a snapshot of GE’s Q1, 2013 results.
However, earnings from other industrial divisions increased 6%, as robust growth was reported in the transportation, healthcare, and aviation segments. GE Capital posted 9% growth in profit during the quarter, in addition, orders for the company also grew by 10%.
The rapidly growing demand for aircraft engines and oil and gas equipment is likely to push GE Capital’s backlog to a sky rocketing $216 billion.
Noticeable trends in key segments
The Power & Water segment witnessed a massive decline of 26% in sales. A considerable drop in demand for wind turbines globally, particularly in Europe, contributed to the decline in sales. Within the U.S, recoiling natural gas prices resulted in a low demand for wind turbines, hence, it poses a huge threat to potential investment inflow for wind farms.
Other segments, which include Aviation, Transportation, Healthcare, and Oil & Gas, reported moderate numbers. Within the Aviation and Oil &Gas segments, orders grew 47% and 24%, respectively. The increase in orders is predominantly underpinned by a rapid increase in demand for new aircrafts from airlines. This also led to higher shipment volumes for airplane engines that are developed by General Electric Company (NYSE:GE).
In the Oil & Gas sector, where GE supplies drilling equipment, growth was reported on the back of rising global demand for Oil & Gas. The increase in demand is a result of higher energy consumption from emerging markets such as China, India, and Brazil. It is noteworthy that the decline in the Power& Water segment was made up by growth in other industrial divisions.
Competitive landscape
General Electric Company (NYSE:GE)’s Aviation competes directly with United Technologies Corporation (NYSE:UTX)‘s Pratt and Whitney Aircraft Engines. United Technologies Corporation (NYSE:UTX) generates the highest percentage of its revenue through UTC Climate, Controls & Safety at around 29%. This is followed by Pratt and Whitney Aircraft Engines and Otis Elevators at around 24% and 20%, respectively. The remaining revenue is generated through UTC Aerospace systems and Sikorsky Helicopters.
