GE Executes Where It Counts

We remain positive on the value of

On a consolidated basis, revenue and earnings declined year over year as a result of currency effects, asset divestitures, and up-front exit costs associated with GE Capital. Excluding these factors reveals a much healthier industrial segment, which managed to increase revenue organically by 3% to $24.4 billion in the quarter, despite concerns related to oil and gas exposure and economic weakness in emerging markets. Six out of seven segments grew organically, with power and water reporting especially strong sales growth of 9% excluding foreign exchange and emerging markets increasing sales 6% since the prior period. The oil and gas segment managed to hold revenue flat in a shaky environment. Despite declining equipment sales, oil and gas services grew 4% organically, underscoring the importance of these higher-margin offerings in GE's portfolio during cyclical downturns.

Industrial operating margin expanded 120 basis points to 14.6%, with gross margin improvement contributing 90 basis points. Most notably, equipment margins improved 120 basis points, highlighting renewed focus on cost efficiency in concert with an aggressive new product development cycle. We view these early results as a positive sign that GE can harness its scale advantages to drive more profitable growth.

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