How GE Makes Money: Aviation, Healthcare, and Power

General Electric Co. (GE) is a global industrial company that provides power generation, renewable energy, industrial aviation products, and healthcare products and services. The company also offers financial products and services. GE serves customers in 130 countries and has manufacturing and service operations globally.

GE operates in industries that require continual investment in research and development. Major competitors include Honeywell International Inc. (HON), 3M Co. (MMM), German-based Siemens AG (SIEGY), and France-based Schneider Electric SE (SBGSF).

Note that on Nov. 9, 2021, GE announced that it plans to split into three public companies corresponding to its aviation, healthcare, and energy businesses. The healthcare spinoff is planned for early 2023. The energy business spinoff, scheduled for early 2024, will contain its businesses that manufacture turbines for power plants and for wind farms. GE will then focus on its aviation business.

GE’s Financials

GE announced in late July financial results for Q2 of its 2021 fiscal year (FY), which ended June 30, 2021. The company’s net loss narrowed to $1.1 billion from $2.1 billion in the year-ago quarter. Revenue rose 8.8% year over year (YOY) to $18.3 billion.

GE’s total segment profit, which includes all profits across the company’s business segments, were $604 million, a significant improvement from the $957 million total segment loss in the year-ago quarter.

In its earnings press release, the company highlighted its strong performance during the quarter, citing a return to growth in revenue, expanding operating margins across all segments, and positive free cash flow (FCF) in its industrial businesses. GE noted that its Aviation segment was showing the beginning signs of recovery. It also reiterated its focus on becoming a simpler and stronger high-tech industrial company.

GE’s Business Segments

GE operates through four industrial segments and a financial segment. Its four industrial segments are Aviation, Healthcare, Renewable Energy, and Power. Its financial segment is named Capital. GE provides a breakdown of segment profit and revenue for each of these business segments. Any negative revenue or segment profit is excluded from the pie charts above.

Aviation

The Aviation segment designs and produces commercial and military aircraft engines, integrated engine components, electric power, and mechanical aircraft systems. It also provides aftermarket services to support its products.

The Aviation segment’s profit was $176 million in Q2 FY 2021, a significant improvement from the segment loss of $687 million in the year-ago quarter. It comprised about 14% of total segment profits. Quarterly revenue rose 10.4% to $4.8 billion, accounting for more than 26% of the company’s total revenue.

Healthcare

The Healthcare segment sells sophisticated healthcare products and technologies. It has expertise in medical imaging, digital solutions, patient monitoring and diagnostics, drug discovery, and performance improvement. The segment’s products and services are primarily sold to hospitals and medical facilities worldwide.

The Healthcare segment’s profit rose 58.3% to $801 million in Q2 FY 2021, accounting for nearly 63% of total segment profits. Revenue for the quarter grew 14.4% to $4.5 billion, comprising about 24% of total revenue.

Renewable Energy

The Renewable Energy segment offers end-to-end solutions for customers. It provides onshore and offshore wind, blades, hydro, storage, solar, and grid solutions, as well as hybrid renewables and digital services.

The Renewable Energy segment narrowed its loss to $99 million in Q2 FY 2021 from $251 million in the year-ago quarter. Revenue for the segment rose 15.5% to $4.0 billion, comprising nearly 22% of GE’s total revenue.

Power

The Power segment provides products and services related to energy production. Its products and technologies utilize oil, gas, fossil, diesel, nuclear, and water to produce electric power. This GE segment offers gas and steam turbines, and a full balance of plant, upgrade and service solutions.

The Power segment’s profit was $299 million in Q2 FY 2021, a significant turnaround from the segment loss of $50 million in the year-ago quarter. It comprised more than 23% of total segment profits. Revenue grew 3.3% to $4.3 billion. It comprised more than 23% of total revenue.

Capital

The Capital segment provides financial products and services with a focus on customers and markets aligned with the company’s industrial businesses. It offers leases, sale-leasebacks, asset trading and servicing, underwriting, working capital, insurance, and other financial products and services.

The Capital segment reported a segment loss of $573 million in Q2 FY 2021, widening from the segment loss of $476 million posted in the year-ago quarter. Revenue declined 0.3% to $858 million, accounting for about 5% of total revenue for the company.

Note that GE plans to wind down the Capital segment as part of its plan to split into three companies. The financial services segment of its healthcare and energy spinoffs will be absorbed into its aviation business.

GE’s Recent Developments

On November 1, 2021, AerCap announced that it had completed the acquisition of GE Capital Aviation Services business from GE. The deal gave GE $23 billion in cash, 111.5 million AerCap shares, and $1 billion of AerCap notes.

On Sept. 23, 2021, GE announced that it has entered an agreement to acquire BK Medical, a provider of advanced surgical visualization, from Altaris Capital Partners for approximately $1.5 billion.

On Oct. 4, 2021, GE-Prolec Transformers Inc. (“Prolec GE”), a subsidiary of a 50/50 joint venture between GE and Mexico-based Xignux, announced that it had completed its acquisition of the SPX Transformer Solutions business from SPX Corp. (SPXC) for $645 million. The acquisition is expected to enable Prolec GE to serve the growing market for sustainable electrical energy solutions in the Americas.