Q3 Results: Momentum Building, Led by GE Aerospace; Solid Revenue & Free Cash Flow, Growth in Services

Today, GE reported third-quarter results with organic revenue growth of 7%, free cash flow of $1.2 billion, and services growth in all businesses. Aerospace led the way, with orders, revenue, and margins all growing.

GE Chairman and CEO and GE Aerospace CEO H. Lawrence Culp Jr. said, “Our team is delivering, with strong Aerospace performance in the third quarter, fueled by the improving commercial backdrop and our progress managing operations and the supply chain environment. We are building broad-based momentum with solid revenue and free cash flow results, as well as services growth in all businesses.”

Overall orders declined 7%, largely driven by Renewable Energy, which faced a tough comparison to the prior year, which saw significant wins in offshore wind. Excluding Renewable Energy, orders were up 8%, and positive across all segments.

GE’s adjusted profit margin* and adjusted EPS* expanded significantly outside of Renewable Energy’s higher warranty and related reserves of $500 million tied to fleet quality. Excluding this Renewable Energy impact, adjusted profit margin* expanded by 80 basis points organically and adjusted EPS* was $0.75.  

Culp also shared with investors that GE will maintain its prior outlook for revenue, trending toward the low end of the high-single-digit growth range. He added that the company now expects 125 to 150 basis points of adjusted organic margin expansion* and $2.40 to $2.80 for adjusted EPS.* “This is primarily driven by the higher warranty and related reserves at Renewables this quarter. And, aligned with the color we shared in 2Q, we’re expecting free cash flow* of about $4.5 billion,” he said.

“Our planned spins are on track, with GE HealthCare ready to launch in January, and GE Vernova in early 2024,” he said.

The GE team is positioning GE Vernova for long-term profitable growth with Scott Strazik and team at the helm. Power is “a stable cash generator as gas utilization grows, we continue to focus Steam on services, we continue to turn around Power Conversion, and we innovate at Nuclear.”

Regarding Renewable Energy, Culp said that the business is leveraging lessons from the Power playbook to transform the business’s fundamentals. Meanwhile, “external catalysts, like recent U.S. climate legislation and the European energy crisis, are increasing investment in new decarbonization technologies, helping position this business for longer-term profitable growth,” he said.

The company’s planned spin of its HealthCare business is “in the home stretch now,” Culp said, with several recent critical milestones achieved, including naming a Board of Directors, publicly filing its Form 10 registration statement, and announcing its December 8 Investor Day. He added, “I’m particularly proud of what they’ve accomplished, navigating COVID, bringing in a new CEO and CFO, and now preparing to operate as an independent global leader in precision health.”

Culp cited lean and decentralization as key enablers of GE’s momentum, allowing the company to run businesses better, gaining ground in safety, quality, delivery, and cost performance, as well as pricing.

“It’s clear our businesses are creating a smarter and more efficient future of flight, driving decarbonization through the energy transition, and enabling precision health,” he said. “We’re set to unleash their full potential through our plans to launch three independent, investment-grade industry leaders, starting with GE HealthCare in two short months.”

Top image: An artist's rendering of an F-35 equipped with GE Aerospace's XA100 engine. Credit: GE Aerospace.

*Non-GAAP financial measure. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures can be found within GE’s third-quarter 2022 earnings materials and quarterly report on Form 10-Q, posted to ge.com/investor.

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