GE Q1 2023 Form 10-Q Summary
Business context and reporting period
General Electric Company reported results for the three months ended March 31, 2023. Continuing operations comprise Aerospace, Renewable Energy, and Power, alongside Corporate activities and run-off insurance operations. GE completed the spin-off of approximately 80.1% of GE HealthCare on January 3, 2023; its historical results are reported as discontinued operations. GE retained approximately 19.9% of GE HealthCare and plans to exit that stake over time.
Key financial metrics
| Metric | Q1 2023 | Prior comparable period |
|---|---|---|
| Total revenue | $14.5 billion | $12.7 billion; up 14% reported and 17% organically |
| Continuing earnings attributable to GE common shareholders | $6.1 billion; diluted EPS $5.56 | Loss of $1.3 billion; diluted EPS loss of $1.16 |
| Adjusted earnings / adjusted diluted EPS | $296 million / $0.27 | Loss of $102 million / loss of $0.09 |
| GAAP profit margin / adjusted profit margin | 44.8% / 6.4% | (9.3)% / 3.5% |
| Cash from operating activities, continuing operations | $155 million | Cash used of $924 million |
| Free cash flow (non-GAAP) | $102 million | Cash used of $1.169 billion |
| Cash, cash equivalents and restricted cash | $12.0 billion at March 31 | $15.8 billion at December 31 |
| Total borrowings | $22.4 billion at March 31 | $24.1 billion at December 31 |
Reported continuing earnings included $5.9 billion of gains on equity securities, primarily the GE HealthCare investment, and are not representative of adjusted operating performance. GAAP net earnings attributable to GE common shareholders, including discontinued operations, were $7.4 billion, versus a loss of $1.2 billion a year earlier.
Segment results (revenue; segment profit or loss): Aerospace $7.0 billion; $1.326 billion, compared with $5.6 billion; $908 million. Renewable Energy $2.8 billion; loss of $414 million, compared with $2.9 billion; loss of $434 million. Power $3.8 billion; $75 million, compared with $3.5 billion; $63 million. Total remaining performance obligations were $242.1 billion, up 2% from December 31, 2022.
Material changes and management commentary
- Revenue growth was led by Aerospace and Power. Aerospace benefited from higher commercial engine shipments, shop-visit volume, spare-parts shipments, and pricing; Power gained from Gas Power services and deliveries.
- Renewable Energy revenue declined 1% reported, while its segment loss narrowed modestly. Management cited Onshore Wind customer delays and deferrals, quality and fleet-availability priorities, and Offshore Wind ramp-up costs.
- Adjusted organic profit rose to $964 million from $434 million; adjusted organic profit margin increased to 6.9% from 3.6%.
- Management cited persistent inflation, supply-chain constraints, material delays, and skilled-labor shortages that have delayed converting orders into revenue and pressured margins. It is pursuing productivity, supplier collaboration, and pricing actions.
- Cash from investing activities in continuing operations was $1.3 billion, including proceeds from sales of retained ownership interests. Cash used for continuing financing activities was $5.2 billion, including the $3.0 billion preferred-stock redemption, debt repayments, dividends, and common-stock repurchases.
Outlook, risks, and unusual items
- The filing provides no quantified consolidated earnings or revenue guidance. Management expects commercial aviation demand to continue recovering, with narrowbody and widebody air traffic projected to return to 2019 levels in late 2023. It expects the gas-power market to remain stable over the next decade, with generation growing at a low-single-digit rate.
- GE expects to complete the sale of part of Steam Power to EDF in the second half of 2023, subject to approvals and customary conditions; a significant gain is expected on closing. The captive industrial insurance subsidiary sale is expected by the first half of 2024, subject to approvals.
- GE expects a final approximately $1.8 billion contribution to its run-off insurance subsidiaries in Q1 2024, subject to statutory reporting and regulatory processes. Q1 2023 included an approximately $1.8 billion contribution.
- Run-off insurance liabilities and annuity benefits were $39.1 billion at March 31. Long-term-care reserve estimates depend on uncertain morbidity, claim duration, utilization, mortality, and premium-rate-increase assumptions. GE notes that changes in experience or assumptions could materially affect results and capital needs.
- Bank BPH’s Polish mortgage portfolio had a $1.126 billion carrying value net of reserves. Estimated losses were $1.540 billion; further litigation developments could cause additional losses or capital contributions, and management says a meaningful estimate of potential additional losses is unavailable.
- GE held $12.0 billion in cash, cash equivalents, and restricted cash, including $1.6 billion in countries with currency controls and $0.8 billion restricted for use. The company reported $13.9 billion of committed revolving credit facilities, which it said were available to support liquidity.
- Other notable risks include potential credit-rating downgrades, geopolitical and macroeconomic conditions, product quality and execution, cybersecurity, and legal and regulatory proceedings. GE reported $420 million of reserves for Alstom legacy legal and compliance matters and said additional losses could exceed the reserve; it could not provide a meaningful estimate of reasonably possible additional losses.
Investor verification priorities
- Separate the $5.9 billion equity-security gain and discontinued-operation results from recurring operating performance; review adjusted measures alongside GAAP results.
- Track whether the $242.1 billion RPO converts to revenue on schedule despite supply and labor constraints, especially in Renewable Energy.
- Monitor operating cash flow, free cash flow, and liquidity after the HealthCare spin-off, asset sales, debt repayments, preferred-stock redemption, and insurance contributions.
- Verify progress and final economics for the EDF Steam Power sale, the captive-insurance sale, and planned monetization of GE’s retained GE HealthCare and AerCap interests.
- Follow developments in Bank BPH mortgage litigation, insurance-reserve assumptions and required capital contributions, Alstom-related proceedings, and GE’s credit ratings.