GE Posts Mixed Q3 Results: Industrial ETFs In Focus

General Electric Company (NYSE:GE) came up with mixed third-quarter results and trimmed outlook, which in turn had a negative impact on the shares of the company in Friday’s trading. Though it posted slightly better-than-expected earnings, its revenues for the quarter failed to beat the Zacks Consensus Estimate. Also, it offered a dismal outlook for this year. However, the company managed to register significant year-on-year increases in both earnings and revenues in the third quarter.

A Detailed Look into GE’s Q3 Results

The company reported third quarter operating earnings (including industrial and other verticals) of 32 cents per share, beating the Zacks Consensus Estimate by a cent and increasing 10% from the year-ago quarter. Moreover, its consolidated revenues of $29,266 million also increased 4% from the year earlier quarter. However, it came in below the Zacks Consensus Estimate of $29,836 million. Though revenues in the Industrial segment saw a year-on-year increase of 4%, the same from GE Capital declined 2% from the year-ago level (read: Industrial ETFs in Focus on Strong GE Q2 Performance).

Separately, third quarter GAAP net earnings of $1,994 million was 20% lower than the third quarter figure. A year-over-year drop of 22% in Energy Connections & Lighting revenues following weak oil & gas and Industrial Solutions markets had a negative impact on the company’s performance during the quarter. Also, revenues in Oil & Gas and Transportation plunged 25% and 22% from their year-ago levels, respectively.

However, year-on-year surges of 5%, 37%, 5% and 66% in revenues in Aviation, Power, Healthcare and Renewable Energy segments, respectively, primarily helped total revenue to come in higher than the year-ago level. Moreover, sustained restructuring initiatives for a leaner firm with a re-focus on core operations also played an important role in boosting the company’s performance during the last quarter. Since Apr 2015 till the end of Sep 2016, GE Capital inked sale agreements worth approximately $193 billion in ENI (MI:ENI), of which it has already completed deals worth $173 billion (read: ETFs & Stocks to Play as U.S. Manufacturing Grows).

Separately, the company offered a dismal outlook for 2016. Currently, it expects 2016 organic revenue growth to be between 0% and 2%, compared to its earlier projection of 2-4%. Operating earnings per share for the year are now anticipated to be between $1.48 and $1.52 compared with its previously guided range of $1.45-$1.55.

Market Impact

Shares of GE declined 0.3% following the results. In this backdrop, we have highlighted five industrial ETFs that have double-digit allocation to this industrial conglomerate giant and are thus poised to remain on investors’ radar in the near future (see all Industrials ETFs here).

iShares Edge MSCI Multifactor Industrials (BO:INDF)

This ETF was launched in May 2016. It has accumulated AUM of $2.6 million and trades in paltry average daily volume of less than 400 shares. It follows the MSCI USA Industrials Diversified Multiple-Factor Capped Index and charges 35 bps in fees per year. Holding a small basket of 40 securities, GE takes the top spot with 12.8% allocation. From a sector look, capital goods occupies the top position at 68.8% followed by transportation (21.3%). The ETF gained 0.9% over the past one-month period.

Fidelity MSCI Industrials ETF FIDU

This fund tracks the MSCI USA IMI (LON:IMI) Industrials Index, holding 333 stocks in its basket. General Electric takes the top spot at 12.1% share with the industrial conglomerates industry making up for almost 21.4% of the portfolio, followed by aerospace and defense and machinery at 20% and 18%, respectively. The product has amassed $149.8 million in its asset base while it trades in moderate volume of nearly 48,000 shares a day on average. It is one of the low cost choices in the space charging 8 bps in annual fees from investors. The fund declined 2.4% over the past one-month period and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Industrial Output Posts 20-Month High Gain: 3 ETFs to Buy).

Vanguard Industrials ETF (MC:VIS)

This fund follows the MSCI US IMI Industrials 25/50 index and holds about 344 securities in its basket. Of these firms, GE occupies the top position with 11.5% allocation. Industrial conglomerates takes the top spot at 20.6%, followed by aerospace and defense at 19%. The fund manages $2.2 billion in its asset base and charges 10 bps in annual fees. Volume is moderate as it exchanges 101,000 shares a day on an average. The product declined 2% over the past one-month period. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Industrial Select Sector SPDR ETF (NYSE:XLI) XLI

This is the largest and most popular ETF in the space with AUM of $7.3 billion and average daily volume of 11 million shares. It follows the Industrial Select Sector Index and charges 14 bps in fees per year. Holding a small basket of 69 securities, GE takes the top spot with 10.5% allocation. From a sector look, aerospace and defense occupies the top position at 22.2%, followed by industrial conglomerates (21.8%) and machinery (16.2%). The ETF declined 1.8% over the past one-month period. The fund has a Zacks ETF Rank #3 with a Medium risk outlook.

iShares U.S. Industrials ETF IYJ

This product provides exposure to 207 industrial stocks by tracking the Dow Jones U.S. Industrials Index. It is heavily concentrated on GE – the top firm – with 10.1% of the assets while others make up for less than 4% share. Further, the ETF is tilted toward capital goods companies at 57.5% while software & services and transportation round off the next two spots with double-digit exposure. The fund has an AUM of $840.8 million and average daily volume of 87,000 shares. Expense ratio came in at 0.44%. The fund declined 2.5% over the past one-month period and has a Zacks ETF Rank #2 with a Medium risk outlook.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>