GE's 3rd Quarter Earnings Report Webcast Summary

Financials:

Keith notes some $22 billion in orders, up 15%, for the third quarter, which was a solid quarter led by energy, aviation, and infrastructure in general. Services had a great quarter, with $8 billion in orders, an increase in 8%. Plastics, however, was down 1%, but overall YTD orders were up 22%.

In the 'Core Indicators' segment of the presentation, Keith noted that margins were down slightly due to market liquidity, but losses remained at historic lows at GE. Operating profit was up overall, although NBC/Universal had a rough quarter again. Plastic also dragged things down, but Infrastructure and Healthcare did extremely well.

Looking ahead to the fourth quarter, GE expects productivity and Infrastructure to bump things up again by 100 basis points. GE expects NBC/Universal to turn around in the fourth quarter, but for Plastics to remain down.

Third quarter earnings were $5.1 billion.

Keith discussed some legacy insurance impact due to hurricane settlements due to Katrina and Rita, but this was GE's last quarter of having to hold money in reserve and pay that out. They're glad to be out of reinsurance.

For the fourth quarter outlook, GE expects all six segments ot have profit growth, including NBC, with overall revenue up 10%, earnings 11-14%, and earnings per share up 13-16%.

GE Segment Details:

GE's Infrastructure business had revenue up 20%,a nd profit up 24%, with aviation leading the way. Energy grew 37%, with wind turbine shipments up 280% (!!!). GE expected a 15-20% growth in operating profit next quarter.

Commercial Finance saw revenue increase 11% and profit 6%, and fourth quarter expectations of over 20% profit growth.

Industrial saw a mixed quarter, with revenues up 3% and profit up 10%. Consumer and Industrial had a solid quarter, with appliances doing well for GE. The cost of benzene dragged the Plastics division down, however. Revenue was up, but profit down. Overall, GE expects fourth quarter overall for this division to show solid profit growth, even with Plastics continuing to struggle.

NBC/Universal had another tough quarter, as GE predicted it would last quarter. There was an increased revenue of 20% thanks to DVD sales. However NBC/Universal phoned in -10% profit. Time was spent pointing out that NBC/Universal was in a turnaround. Primetime is promising this year, with 15% increase in ratings. NFL is helping out. Cable revenues are up 17% thanks to USA and BRAVO. The news teams are good, and NBC/Universal is getting ready for an expected $1 billion in pull through due to the Olympics and the NFL. Fourth quarter outlook is for 0-5% increase in revenues and 10% in profit.

Healthcare saw a 9% increase in revenue, 19% profit with solid increases in equipment sales, services, and orders. Ultrasound sales did well with 14% growth. GE expects 15-20% growth for the next quarter.

GE Money saw revenues increase by 14%, and profit by 13%, and they pointed out that although Asia saw a -7% increase in income, the Americas saw 33% increase and Europe saw 17%. GE expects profit growth of 15% here next quarter.

Summary:

Jeff comes back in at this point to summarize the whole outlook. It was a solid year for GE, with revenue up 10% and earnings up 12%. He feels that GE is well positioned and has a strong backlog going into 2007. NBC is turning around and in good shape. Investments in research and technology are paying off. He feels they're getting money out of slow growth businesses and into faster growth businesses, and are staying focused and on track.

Questions from analysts:

At this point analysts come in with some questions. Some highlights:

Lehman Bros asks if the environment is slowing? Jeff Immelt says look at macro impact of industry on housing starts and auto slowing down yes, but also look at appliances: retail revenue are up 18%, even with slowing housing business. As interest rates go up some slowing, but the average US consumer is still buying.

Citigroup asks questions about margins and backlog in terms of GE's energy segment. Jeff thinks 4th quarter progress will continue, but thinks wind turbine sales will level off. Gas turbines will grow, but will have a better service/order balance. Infrastructure will drive profit up overall.

Citigroup asks about any hint of consumer balances going up in GE Money? Jeff doesn't think there's anything to worry about. Pretty good volume, delinquency down. No warning signs on consumer finance in the US.

JP Morgan wants to know about turnover in management? Jeff says turnover is very low in the top 500, retention level is historical.

Goldman Sachs asks about changes in operating strategy in plastics? Growing volume is important, and pricing Jeff thinks will stabilize in 2007, but benzene is at historic highs. Will continue to focus on this as more of a specialty business.

When asked about airbus delays and impact, Jeff says it slows them down a little in short run, but since Pratt&Whitney is in the venture with them as a partner, GE is not all that put out by Airbus delays.

Bear/Stearns asks about any gas turbines insight? Jeff says lots of international gas turbines, only 2 went to US. Middle East and Africa and China were the big purchasers. What about wind turbines? With tax credit for wind turbines going away, is there a bubble in wind orders? Jeff thinks there is huge global demand for renewable energy since they snagged the business, and thinks the outlook is good and that it's all positive. Pricing is strong, and GE expects progress payments just as a matter of business. What about down payments for wind turbines? Jeff thinks people are ordering without any worry about the tax credit for wind turbines going away. There is strong demand for renewable energy and GE's wind turbines will do well there.

Credit Suisse wants more info about healthcare. Jeff breaks down how much the different parts were up, particularly in IT medical services. GE is seeing the benefits of an integrated healthcare business. They ask about the big picture on commercial airspace and defense? Jeff says that this is the healthiest commercial aviation market he's seen, and global is strong is well. On the military side they're not planning on seeing much growth.

Morgan Stanley wants to talk about plastics more: how does benzene differ so much from other natural gases right now?Jeff says gas prices would suggest a lower benzene price, but they aren't, but over time they might close, which GE obviously hopes for. Why doesn't GE get rid of plastics? Jeff says they review their businesses, but while they run them they run them for the long term. As a result, they're going to run Plastics hard while they're in it and try and make a go for it.