Industrial conglomerate General Electric (GE- Free General Electric Stock Report) has reported results for the fourth quarter and full year of 2016. The company's showing fell short on the revenue side of the coin, but was about on par with Wall Street's reduced expectations on the earnings front. Troubles in the oil & gas patch were the top line's primary challenge, though a coming merger with Baker Hughes should help in that regard. We have cautioned investors for quite some time to not get too caught up in GE's quarterly figures, due to the unprecedented amount of portfolio flux that has gone on over the past two-year-plus span. Nevertheless, the stock is down about 2% in early trading.
Revenues for the three-month period ended December came in at $33.1 billion, shy of the $33.9 billion consensus estimate, and our call, which was a hair below that figure. Sales at GE Power, the largest division, rose 20%, to $8.48 billion. The highlights here were a $900 million turbine deal with a Latin America-based power plant and a $1.4 billion order from the Iraq Ministry of Electricity. Moving to aviation, sales rose 7%, as GE booked $480 million in planned purchases for its new LEAP jet engine. Conversely, oil & gas revenues tumbled 22%, with oil prices remaining well off from the highs set in 2014. Orders are a very important metric to keep an eye on, as both we and management anticipate that better volumes are coming for the company. Too, these measures help to frame growth targets for the year ahead and beyond. With that, orders were up 4% in the fourth quarter, to $33.9 billion, and climbed 5% on the year. Backlog was 1.9% higher versus the year-earlier period, at $321 billion, with $237 billion of that coming from lucrative service agreements. Also, in the digital arena, where GE is banking on much of its future success, software orders rose 36% in the quarter. The Predix operating system is key to this operation. Orders here were $300 million in 2016, with management looking for that tally to reach the $1 billion mark in 2017.
From an earnings perspective, share net was down on a year-over-year basis, but in line with the reduced outlook that had been formed over the past few weeks. Excluding one-time charges, EPS of $0.46 should please most in the investment community given the backdrop during this latest term, particularly in the oil & gas sector. Again, share repurchases and asset sales have wreaked havoc on the short-term predictability of the bottom line, so harping on these numbers may not be the best way to get a good idea of how GE is actually performing, in our view. That situation should improve this year, but subscribers need to remember how sizable, both in scope and contributions to earnings, that GE Finance was in years past. Presently, the fire sale that occurred across this unit is approaching $200 billion. Then, adding in the Alstom purchase from last year, and the Baker Hughes merger set to go through in the next few months, the moving parts are numerous.
Looking ahead over the balance of this year, management reaffirmed a revenue growth target that had been floated in recent commentary. Excluding acquisitions, total revenue is expected to increase in 2017 to a range of 3% to 5%. We find this figure to be aggressive but attainable, especially if oil prices show some signs of life, as most pundits predict they will to some extent. As far as earnings go this year, we are maintaining our 2017 expectation of $1.70, but again there are a high number of factors in play. For starters, alterations to the portfolio will be coming in, albeit at a much-more moderate pace. Add to this, management has been very aggressive with share repurchases of late. Then, the volatile environment has to come into the equation. On top of all this, the presidency of Donald J. Trump brings on a new set of variables. Corporate tax reform would be a most welcome sign at this juncture, as any reduction in the company's tax bill will be felt on the bottom line. The new administration's promises of infrastructure investment and an improved business climate should also be music to investor's ears. However, we are not yet comfortable quantifying these developments, as we await significantly more color on the exact plans that are in store.
GE stock is a solid selection from a number of investment angles. Yes, the ''Trump Bump'' was felt here and got the focus off in-house fundamentals a bit, but the underlying turnaround story is compelling in-and-of itself. We like this blue chip for both the year ahead and the stretch to 2019-2021. Also, those patient accounts can opt to pocket this stock's handsome and rising dividend (yielding north of 3% versus the Value Line median of 2%), while the framework of a return to the company's industrial roots is built upon.
About The Company: Founded in 1892, General Electric Company has grown into one of the largest and most diversified industrial companies in the world. With products ranging from aircraft engines, power generation, oil and gas production equipment, and medical devices. It is in the process of selling its home appliance arm and unwinding its sizable finance operations. It serves customers in more than 100 countries. On a geographic scale, more than half of General Electric's revenues came from overseas in 2015.
