82170665

This document is being provided for the exclusive use of UNIVERSIDAD ESAN at UNIVERSIDAD ESAN
North America Equity Research

18 October 2010
Overweight
General Electric Co.
GE, GE US
Price: $16.25
The Wall
Price Target: $21.00
While other companies are basking in early-cycle glory, GE has built a wall of worry,
and while we appreciate the reasons for the negative stock reaction, with longer-term
upside levers unchanged and a fresh dose of investor skepticism, our OW rating is
unchanged.
3Q more clean up than clean. Results were in line with our above-consensus
model, though Industrial profits missed, while a big Shinsei charge offset ongoing
improvement in losses at GECS. Positives were Industrial orders and GECS core.
Fresh black box worries emerge from the 3Q, not helped by financial
services concern du jour . . . . Shinsei popped up again, and now the concern is the
potential for a lingering liability at WMC, reinforcing the negative perception of GE
as a black box. Management claims Shinsei is close to being put to bed, while it
does not appear to us WMC is a major issue. This will take time to prove a key
brick in the wall.
. . . Industrial moves center stage and 4Q revs a show me . . . While we were
not expecting a big quarter from late-cycle businesses, results still underwhelmed,
with a 15% q/q drop in Energy revenues the low light. 4Q guidance for flat y/y
Industrial revenues points to better days ahead, but management now needs to
deliver on a $4B sequential increase, a show me. Importantly, for 11, outside of
Wind, the GT backlog is the standard 85% sold out, positioned well with a bottom.
Electrical Equipment and MultiIndustry

AC
C. Stephen Tusa, Jr CFA

(1-212) 622-6623
stephen.tusa@jpmorgan.com
Drew Pierson
(1-212) 622-6627
drew.a.pierson@jpmorgan.com
J.P. Morgan Securities LLC
Price Performance
19
$
17
15
13
Oct-09
Abs
Jan-10
Apr-10
Jul-10
Oct-10
YTD
1m
3m
12m
7.4%
-1.8%
11.1%
2.6%
. . . while GECS fundamentals still on an upward trajectory. Improving credit

trends look sustainable (3Q provisions down $400mm q/q, reserves flat, coverage
up). Net interest margin remains solid, and CRE continues to shrink and stabilize.
Bottom line: 2011E will be materially better than 2010E, and 2012 should be
strong, but near term revision momentum stalled. 2011E EPS revision
momentum is likely stalled for now, and we are taking out $0.02 for pension, though
this does not change our belief that earnings growth will accelerate next year, and
even further in 12, a positive versus earlier-cycle peers.
Stock still cheap, pathway to better days over next 6-9 months. Shares trade at a
5-10% discount to peers on a SOTP basis. We see a wall of worry that includes
resolution on discops issues (Shinsei/WMC) and any degree of modest turn in latecycle businesses (starting with execution on 4Q revs), two things we think work in
GEs way over the next 6-9 months. Interestingly, core fundamentals at GECS/CRE
are no longer the major issue.
General Electric Co. (GE;GE US)
2009A
EPS - Recurring ($)
Q1 (Mar)
Q2 (Jun)
Q3 (Sep)
Q4 (Dec)
FY
0.26
0.26
0.22
0.28
1.03
2010E
2010E
2011E
2011E
(Old)
(New)
(Old)
(New)
0.21A
0.30A
0.29A
0.21A
0.30A
0.29A
1.13A
1.13A
1.30
1.28
Source: Company data, Reuters, J.P. Morgan estimates.
2012E
1.65
Company Data
Price ($)
Date Of Price
52-week Range ($)
Mkt Cap ($ mn)
Fiscal Year End
Shares O/S (mn)
Price Target ($)
Price Target End Date
16.25
18 Oct 10
19.70 - 13.75
172,493.75
Dec
10,615
21.00
31 Dec 11
See page 20 for analyst certification and important disclosures.

J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.

(1-212) 622-6623

18 October 2010
The Wall
While other companies are basking in early-cycle glory, GE has built a wall of
worry, and while we appreciate the reasons for the negative stock reaction, with
longer-term upside levers unchanged and a fresh dose of investor skepticism, our
OW rating is unchanged. Looking ahead, its important to maintain the long-term
perspective, little of which has changed coming out of this quarter. First, while
discops are annoying, the core Bear case built around GECS continuing to fade. Two,
the cash story remains a positive, and FCF is on track for the year. Lastly, on
Industrial, late-cycle businesses like this can lag for some time, and the catalysts of
an uptick are still on the come, with execution on the 4Q industrial revenues a show
me that should bring resolution as a catalyst around year-end. All in, the dynamic of
a business close to trough with accelerating earnings growth in 2011/2012 is intact
and a key positive. We start with a quick post-game wrap of the quarter.
Table 1: GE Revenues Remain Close to Trough
Table 2: Group Y/Y EPS Growth (JPM est)
% of total company sales
EPS growth y/y
MMM
DOV
DHR
ITT
Group Avg
ROK
HON
GE
IR
HUB/B
EMR
LII
TYC
TXT
SPW
% Off
Peak
2%
-10%
-3%
-4%
-13%
-16%
-13%
-10%
-16%
-12%
-15%
-20%
-16%
-25%
-18%
% Off Trough
14%
19%
10%
3%
7%
10%
7%
1%
6%
1%
3%
8%
1%
9%
1%
Spread
15%
10%
7%
-2%
-5%
-6%
-7%
-8%
-10%
-11%
-12%
-12%
-16%
-16%
-17%
DHR
DOV
EMR
HON
ITT
MMM
ROK
SPW
TXT
TYC
IR
AVG (ex-TXT)
GE
2011E
14%
11%
19%
12%
0%
1%
15%
22%
59%
20%
32%
14%
2012E
10%
13%
14%
34%
8%
8%
17%
26%
83%
13%
21%
16%
15%
27%
Source: J.P. Morgan estimates.
Source: Company data, J.P. Morgan estimates.
GEs 3Q was in line with our above-consensus estimate and $0.02 ahead of the
Street, though the details were mixed. Lower tax/corporate provided $0.03 of lift,
mostly on lower-than-expected charges in the quarter, while we were too
conservative on a tax rate that looks set to go lower in 2H10. Meanwhile, core
segment profits missed our estimates by $0.03, mostly at the important Energy
business. All in, mixed fundamental results along with ongoing nonfundamental
distraction from discops left too many questions, and we were not surprised shares
traded lower.
To start, the Industrial businesses returned to focus this quarter, but in a negative
way, missing our top-line estimates in a somewhat surprising q/q decline. This was
most apparent in the Energy business, which showed softness not only in Wind but
also in the core Thermal unit. The guidance for flat y/y Industrial revenues in 4Q10
relieves some of the concern, making 3Q look more like a blip for what remains a
lumpy business, but the implied 15% q/q revenue ramp for next quarter no longer
looks conservative. The major equipment order increase of 9% was positive but not
enough to offset, as most of this came from Aviation while the key Energy/O&G
2

(1-212) 622-6623

18 October 2010
businesses declined. Further, weakness in new order pricing suggests that the
favorable price spread in recent quarters is likely to normalize next year, removing a
tailwind. Bottom line, despite a lack of good news out of the quarter, we were not
expecting big things out of the late-cycle businesses here and continue to believe we
are bouncing along the bottom at Industrial.
On GECS there was not much new out of 3Q as the business is showing sustained
improvement. Credit continues to heal, net interest margin remains strong, while
Real Estate is still tough but showing signs of bottoming out. The results themselves
were somewhat underwhelming, however, with PTPP declining q/q owing to some
one-time impairments at GECAS and some treasury marks that hit the P&L. We
view these as one-off events, and there is no change to our view that GECS earnings
are on a solid upward trajectory over the next 1-2 years, but after several quarters of
upside surprises, there was no clear incremental positive from 3Q.
Outside of fundamentals, discops remain a distraction and reinforce concerns that
GECS is a black box. There are a few issues that continue to weigh on sentiment,
and that we continue to believe (1) are not big enough to matter over the long term
and (2) represent a catalyst upon gaining more certainty in the quarters ahead. First
are the Shinsei charges in discops, with the company setting aside another $1.1B in
3Q provisions ($1.7B YTD), with a view that this would be the final charge. From a
big-picture perspective, we continue to believe this is not a major issue as a ~$2B
cash call is small relative to GEs financial position, and the reserve was within the
range of outcomes provided on the 2Q call, which included $1.2B of incremental
exposure at the high end. Indeed, the current reserve can handle a 5% m/m decline in
claims continuing through 2015, or the September run rate of claims for 24 months,
so reasonably conservative. What was surprising, however, was the contrast in tone
between 2Q, when management was upbeat about declining claims trends, and 3Q,
when September claims jumped 17% m/m and management went directly to a
reserve level that was previously portrayed as downside case. Whether material or
not in the long run (we think not), we believe investors were unnerved by the sudden
shift in tone.
The Shinsei issues were magnified, however, by emerging concerns around mortgage
put-back risk at WMC, GEs US Alt-A/subprime mortgage business exited in 2007.
As background, GE acquired WMC in mid-2004 and originated through 2006 in an
originate to sell model; volumes were ~$33B in 2006 and ~$32B in 2005, and GE
stopped new issuances in 1Q07. GE put up $500mm of reserves for any residual
exposure at the time of its exit and still has ~$100mm of standing reserves from the
sale of the business in 2007. This compares to pending claims of ~$250mm (of
which it has been winning >80% YTD). Management indicated it expects no related
charge in 4Q10 for more claims.
To help put this in context, we run some numbers using a set of assumptions from
our US banks credit analyst Kabir Caprihan (see recent note here) around loans
issued between 2H05 and 2008, which he deems to be at most risk. In a base case of
risk exposure for the industry, he assumes that (1) 100% of the issued loans Alt-A,
option ARM, and subprime mortgages are still outstanding; (2) 50% are delinquent;
(3) 15% of the delinquent loans are put back; (4) 50% of the put-back mortgages are
accepted by the courts; and (5) the issuer takes a 50% loss on accepted mortgages. In
a more severe scenario, 40% of loans are assumed to be put back, of which 30% are
accepted. Applying these numbers to GEs WMC (assuming $50B of originations
3

(1-212) 622-6623

18 October 2010
between 2H05 and 2006) implies somewhere between $1.0B-1.5B in potential

exposure, even under relatively conservative assumptions. Similar to Shinsei, this is
at most a cash call and not a major issue long term, in our view, though it is yet
another nonfundamental issue management will have to address.
Table 3: GE Mortgage Put-Back Scenarios for WMC
$mm
Base Case
$ amount
Issued
50,000
Delinquent
25,000
Delinquent & Put Back
3,750
Put-backs accepted
1,875
Loss severity on put backs
938
Assumption
50%
15%
50%
50%
Severe Case
$ amount
Issued
50,000
Delinquent
25,000
Delinquent & Put Back
10,000
Put-backs accepted
3,000
Loss severity on put backs
1,500
Assumption
Tweaking down 2011 estimate cheap stock with a wall of worry

Our 2010 number is unchanged, though we are clipping ~$0.02 out of our 2011
estimate, which includes $0.03 from the industrial businesses and an additional $0.02
for pension, partially offset by tax and a lower share count (recent repo). Pension is
not news, nor is it unique to GE, but this is a headwind next year. The details here
include a $1B increase from amortization of prior losses, while 25bps of discount
rate headwind is $200mm, and the company would face another $300mm in
headwind if GE lowered its long-term return assumption 50bps we model a $1.6B
y/y headwind, or $0.11 of EPS on an after-tax basis, which accounts for this risk.
While our revisions are not large on an absolute basis, we think upward 2011 EPS
revision momentum is likely stalled until GE can show better visibility on a turn in
the Industrial businesses.
50%
40%
30%
50%

(1-212) 622-6623

18 October 2010
Table 4: GE EPS Bridge, JPM(E)

$mm except per-share data
09 Actual
1.79
(0.08)
0.03
(0.02)
0.04
0.05
0.00
0.00
0.00
0.05
0.07
(0.05)
1.86
0.14
(0.34)
(0.63)
(0.34)
0.14
(0.44)
1.03
10 JPM(E)
1.03
(0.07)
0.03
0.08
0.03
(0.02)
(0.01)
(0.02)
0.00
(0.01)
(0.05)
(0.01)
0.99
0.07
(0.07)
0.14
0.27
(0.28)
0.14
1.13
11 JPM(E)
1.13
(0.11)
(0.00)
0.00
0.03
(0.03)
(0.03)
0.02
0.01
0.02
(0.01)
0.00
1.02
(0.02)
0.07
0.22
0.21
(0.14)
0.14
1.28
Prior Year Industrial Sales

+ Currency
+ Organic
= This Year Industrial Sales
Organic Growth
111,733
(1,100)
(7,589)
103,044
-7%
103,044
(635)
(2,644)
99,765
-3%
99,765
830
3,760
104,355
4%
Implied $ Profit Incr/(Decr)

Implied Incr/Decr Margin
(4,576)
60%
(1,061)
40%
961
26%
Beginning EPS
Pension
Corporate, x-pension/rstrng/gains
Restructuring spend
Restructuring saves
Industrial Gains/Impairments
Aviation R&D
Olympics
Forex
Interest
Tax Rate
Share Count
Base EPS
Industrial Price/Cost
Industrial Volume/Mix
GE Capital
Provisions
Tax
NIM & Other
Final EPS
Source: Company reports, J.P. Morgan estimates.
On a valuation basis, GE shares are not expensive, which should provide support
near term. Our bottom-up sum-of-the-parts based on public comparables suggests
shares are 5-10% undervalued at current levels. Looked at another way, assuming
just 1x tangible book value for GECS (low end of bank peer ranges), GE Industrial
trades at 14x 2011E EPS versus ~15x for the EE/MI group. Over time, shares look
attractive as we think the GECS multiple can expand with better earnings and GEs
Industrial assets deserve a premium multiple to the group; however, closing the
standing discount will require execution and better earnings visibility, both of which
took a step back this quarter, in our view.
Table 5: With GECS at 1x TBV, GE Industrial Trades at 14x 2011E EPS
Industrial EPS
GECS Implied
FY11E EPS
0.90
TBV/share
3.70
Current Stock Price
Multiple
14.0
Multiple
1.0
Per Share
12.55
Per Share
3.70
16.30
Source: Bloomberg, J.P. Morgan estimates.

(1-212) 622-6623

18 October 2010
Table 6: SOTP Implies GE 5-10% Undervalued

$mm except per-share and multiple data
2011E
EBITDA
GE Industrial
Infrastructure ex-HC/O&G
Oil & Gas
Healthcare
Home & Business Solutions
NBCU
Consolidated Ind Value
GECS Tangible Book
Total Value
Net debt
Equity value
Shares
14,192
9,550
1,285
2,761
596
2,411
17,549
37,331
Suggested value per share
Suggested
Multiple
Suggested
Value
2011E
EPS
Suggested
Multiple
Suggested
Value
8.4
8.2
9.8
8.3
8.5
7.2
7.8
1.4
118,778
78,264
12,585
22,852
5,077
17,303
$136,081
51,817
187,898
(2,955)
$190,853
10,650
$0.78
$0.56
$0.07
$0.15
($0.00)
$0.12
14.1
14.2
15.8
13.1
13.6
12.8
37,331
1.4
$11.04
$8.00
$1.13
$1.94
($0.03)
$1.50
$12.54
$4.87
$17.92
Average of two analyses
$17.66
Current stock price

Difference
$16.25
8%
Source: Bloomberg, J.P. Morgan estimates. Suggested multiple is based on average of public peers in related industries.
$17.41

(1-212) 622-6623

18 October 2010
Key Points on Industrial

Energy a top line miss
The disappointing point in the quarter was the Energy business, where revenues fell
15% on a q/q and y/y basis. This was driven mostly by wind, down 30% y/y, partly
on a tough comp last year unit shipments were actually up to 616 versus 511 last
quarter, though there is some seasonality at play here. Other areas, such as Jenbacher
(-29% y/y) and Aeroderivatives (-25% y/y), contributed to the weakness. There were
also lower shipments of 3rd-party products in service contracts, which hurt the top
line by ~$300mm y/y but with less profit impact, while steam turbine and generator
shipments were also down 50%+ y/y. On a sequential basis, we note that GE shipped
8 steam turbines last quarter versus zero in 3Q, which we think could represent a
~$300mm swing in 3Q versus 2Q. We recognize that revenues can be lumpy quarter
to quarter due to project activity, but the 15% q/q drop in revenues was the biggest
weve seen since at least 2005 (excluding 1Q, a seasonally light quarter for Energy)
and represents a new cycle low.
Table 7: Energy Down 15% y/y in 3Q
$mm
3Q09 Energy Revenues
Wind
3rd party pass thru products
Other
3Q10 Energy Revenues
7,979
(600)
(300)
(267)
6,812
Importantly, looking ahead, we continue to believe we are close to bottom. Indeed,

the important GT business remains 85% sold out for a flat year next year, needing
orders for about 18 units for 2011 delivery over the next few quarters (versus average
run rate of ~20-25 orders per quarter). Wind is an issue, though our model is
appropriately conservative here, down 15% next year this includes a ~30% dropoff q/q in 4Q and no improvement from that run rate into next year.
Flat 4Q growth suggests a solid pickup from 3Q run rate, but admittedly a
show me
For 4Q, management guided to flat y/y Industrial revenues, or a ~$4B sequential
increase. On the positive side, this suggests better visibility in the coming quarter,
with some improvement coming from Aviation aftermarket as well as Oil & Gas
(Gorgon shipments accelerating). Indeed, Industrial revenues can show quarterly
swings, and GE has had some big 4Q lifts in the past. On the negative side, however,
the 3Q run rate makes near-term numbers look less conservative, as we are now
counting on a solid 4Q.

(1-212) 622-6623

18 October 2010
Figure 1: GE Industrial Revenues

$mm
35,000
30,000
25,000
20,000
4Q10 Guide
3Q10
2Q10
1Q10
4Q09
3Q09
2Q09
1Q09
4Q08
3Q08
2Q08
1Q08
4Q07
3Q07
2Q07
1Q07
15,000
Source: Company reports.
Orders grow, led by aviation, while O&G orders slip

As for orders, the 9% growth in major equipment orders was ahead of our
expectations and a positive at face value. Looking closer at the orders, however, we
note that much of this came from 33% growth at Aviation. Outside of Aviation,
major equipment order growth was flattish, led by continued strength at HC (+5%)
and declines at Energy (-5%). On the services side, however, the picture was brighter
as total orders were up 4% including 8% growth at Energy. Looking ahead, next
quarters equipment orders are likely solid as O&G saw ~$370mm in orders pushed
to 4Q, while Energy should begin booking some of the recent order wins in Saudi
Arabia and Korea but the 4Q09 order comp gets more difficult by >$2B, which
means GE needs ~$1.3B more orders than it booked in 3Q just to be flat y/y. All in, a
mixed picture.

18 October 2010
Figure 2: Major Equipment Orders
Figure 3: Services Orders Turn Positive
Y/Y % Change
Y/Y % Change
20%
10%
19% 16%
7%
5%
2%
4%
2% 3%
10%
0%
-1%
-10%
-10%
-6%
-20%
3Q10
2Q10
1Q10
3Q09
2Q09
1Q09
4Q08
3Q08
2Q08
-20%
Total Major Equipment Orders

20%
14%
0%
3Q10
2Q10
-14% -10%
1Q10
2Q09
1Q09
4Q08
3Q08
2Q08
-42%
-32%
4Q09
-21%
3Q09
-11%
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
1Q08
17% 9%
11% 4% 5%
1Q08
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
4Q09

(1-212) 622-6623
Serv ice Orders

Figure 4: Aviation Drives Most of the Equipment Order Growth in 3Q

+4%
8,000
6,600
5,200
3,800
+32%
2,400
1,000
Av iation
Non-Av iation
3Q09
3Q10
Pricing on Energy orders continues to slide despite positive value gap

Another detail of the results worth watching is the pricing on new orders, particularly
at Energy, which will be an indication of future margins. GE continues to benefit
from a positive value gap (price/cost), which has been a result of good pricing in
the backlog along with ongoing material cost savings from the supply chain. This
was $190mm in Energy Infrastructure this quarter, though this was down from
$300mm in recent quarters. Further, pricing on new orders has weakened in recent
quarters, particularly in Wind but also in Thermal. This is something to watch.

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18 October 2010
Figure 5: Pricing Value Gap Still a Profit Driver, But Narrowing . . .

Operating Profit $, in millions
2,000
500
1,500
456
1,000
500
1,346
937
1,639
1,109
934
1,086
1Q09
2Q09
190
1,361
1,471
2Q10
3Q10
300
400
216
300
1,317
873
1,039
0
1Q08
2Q08
3Q08
4Q08
Energy Base
3Q09
4Q09
1Q10
Energy Value Gap
Source: Company reports and J.P. Morgan estimates.
Figure 6: . . . and Pricing on New Energy Orders Moving Negative

% change in price y/y (new orders)
10%
5%
6%
1%
0%
-5%
-2%
-1%
-1%
-5%
-10%
-8%
-15%
-12%
4Q09
1Q10
2Q10
Thermal
3Q10
Wind
Source: Company data.
Historically, pricing changes tend to follow orders, with a significant lag

Indeed, as shown in the chart below from the last cycle, Energy pricing tends to lag
the change in orders, as the company works through its existing backlog. In 2003,
even as orders bottomed and moved up 9%, price was down 2% and stayed down
through 2005, a drag, even as volumes turned up. In total, the cumulative drag from
price, peak to trough, was $1.7 B, or 27% of peak Power Systems profits. While we
acknowledge there are few orders being booked currently, making the pricing trend
harder to discern, the value gap for 2011 is an important variable moving into the
December outlook call.
10

(1-212) 622-6623

18 October 2010
Figure 7: Price Change Lags Orders (y/y change)

Price y/y
Orders y/y
Orders
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
Price
35%
15%
-5%
-25%
-45%
-65%
2002
2003
2004
2005
2006
Aviation services mixed in 3Q but showing signs of picking up

In the important Aviation services business, performance was underwhelming again,
down 3%, hurt by low profitability in the initial GENx engine shipments. Core daily
spares order rates, however, continue to show improvement, accelerating to
$22.2mm/day in 3Q. This should bode well for 2011 as the business exits the year.
Figure 8: Daily Spares Order Rate Continues to Improve
$mm/day
23
22
21
20
19
18
17
16
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
Looking into next year, management did not update its guidance for 2011 aviation
R&D, which stands at a $300-500mm y/y increase, though comments suggested that
some of this ramp was occurring in 2H10. We expect more update on the December
outlook call. For now, our model incorporates a $400mm headwind and a ~30% core
incremental margin, which seem reasonable in a year when growing
aftermarket/service sales should be a tailwind for margins.
Table 8: 2011E Aviation Bridge
$, in mm
Start
Core
Reversal of 2010 Gain
R&D Increase
End
Sales
17,750
1,100
18,850
Growth
6%
Profits
3,284
364
(100)
(400)
3,148
Mgn
33%
11

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18 October 2010
Key Points on GECS

Credit continues to heal
In credit, 3Q showed continued solid trends with both provisions and charge-offs
~$200mm below our estimates. Overall reserves were flat at $9.1B, which included a
~$100mm increase at Commercial businesses and a ~$100mm decrease at Consumer,
where the book is shrinking. Overall Coverage increased to 2.69% from 2.66% in
2Q, showing that coverage can increase even as provisions come down significantly.
As for Real Estate, trends are stable with earnings up q/q and pretax impairments in
the Equity book of $486mm (2Q $528mm, 1Q $585mm) continuing their downward
trends.
Figure 9: Provisions and Charge-Offs Continue to Come Down
$B
3.5
3.0
2.5
2.0
1.5
1.0
0.5
3Q08
4Q08
1Q09
2Q09
3Q09
Prov isions
4Q09
1Q10
2Q10
3Q10
Write-Offs
Net interest margin holds in, PTPP slides sequentially, mostly a function of
impairments
Elsewhere, the pretax preprovision income of $2.2B was down from $2.7B, a
negative at face value. Looking closer, however, this q/q decline was primarily
driven by the annual impairment test at GECAS (~$250mm) and the deconsolidation
of Regency at EFS (~$200mm) as well as some Treasury marks which reflect the
companys hedging positions (another $200mm hit sequentially, as this was a
$100mm benefit in 2Q and a $100mm negative in 3Q). Thus, the overall picture was
little changed from 1Q on an underlying basis.
Table 9: Sequential GECS PTPP Walk
Table 10: Sequential GECS Revenue Walk
$bn
$bn
PTPP 2Q
GECAS impairments
Treasury marks
Fewer RE impairments
Regency
Asset reduction/other
PTPP 3Q
2,717
~(250)
~(200)
~(50)
~(200)
~(50)
2,164
2Q GECS revenues
Regency deconsolidation
Treasury marks
Asset reduction/other
3Q GECS revenues
13,148
~(200)
~(200)
~(300)
12,469
Indeed, GE Capitals portfolio margin is now running at 5.2% YTD, little changed
from 1Q (though the above items add some noise), and the company is ahead of its
~5% target for the year. Meanwhile, new business volumes continue to be booked at
12

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18 October 2010
a solid 2.9% ROI in 3Q (2.6% in 2Q). This means that the positive net interest
margin story remains intact, an ongoing driver into 2011-2012 given that the
commercial book turns over every 4-5 years, on average.
Figure 10: GE Capital Portfolio Margin Remains Solid
6.0%
5.7%
5.4%
5.5%
5.2%
4.8%
5.0%
4.6%
4.5%
4.0%
2006
2007
2008
2009
2010 YTD
13

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18 October 2010
3Q Details
3Q EPS of $0.29 were in line with our model. Overall op profits missed our aboveconsensus model by $0.03, all at Industrial, with Capital Finance in line. Corporate
helped by $0.02 and tax by $0.01. At Industrial, the miss was primarily at Energy
Infrastructure, where the top line missed by 17% but margins beat by 120bps. Tech
Infrastructure was also light (-$0.01), driven by Aviation and Healthcare. NBCU missed
by $0.01. Total sales of $35.9B were ~$2.7B lower than our estimates of $38.6B. Overall
Industrial sales missed by 8%, with margins missing by 70bps at 16.2%. Cash generation
was in line with 2Q at $3.8B, on track for $14-15B for the year. On Capital, provisions of
$1.7B were below our $1.9B, while pretax earnings were $468mm (JPMe $723mm) and
PTPP was $2.16B (2Q $2.72B). GECS equity came in at $66.9B (2Q $67.3B).
Table 11: 3Q10 Details vs. JPM Estimates
$, in millions
Energy Infrastructure
Technology Infrastructure
NBC Universal
Capital Finance
Corporate Items & Eliminations
Total Sales
Actual
3Q10A
8,359
9,210
2,125
4,069
11,616
509
35,888
JPM(E)
3Q10E
9,800
9,440
2,225
4,400
12,087
700
38,652
($)
(1,441)
(230)
(100)
(331)
(471)
(191)
(2,764)
NBC Universal
Capital Finance
Total Segment Profit
1,656
1,474
104
625
871
4,730
1,827
1,663
160
726
830
5,207
(171)
(189)
(56)
(101)
41
(477)
-10%
-13%
-54%
-16%
5%
-10%
(0.01)
(0.01)
(0.00)
(0.01)
0.00
(0.03)
Corporate and Eliminations

Interest and other financial charges
Provision for Taxes
Share Count
EPS - Continuing Ops
Industrial Tax Rate (%)
(472)
(393)
(705)
10,674
$0.29
22.2%
(780)
(430)
(827)
10,725
$0.29
27.5%
308
37
122
(51)
-65%
-9%
-17%
0%
0.02
0.00
0.01
0.00
0.00
19.8
16.0
4.9
15.4
7.5
13.2
18.6
17.6
7.2
16.5
6.9
13.5
Margins
NBC Universal
Capital Finance
Total
A vs. E
%
-17%
-2%
-5%
-8%
-4%
-38%
-8%
Per Share
bps
1.2
(1.6)
(2.3)
(1.1)
0.6
(0.3)
Energy Infrastructure weaker than expected

Energy Infrastructure profits were a modest miss ($0.01) versus our model, flat y/y,
driven mainly by weaker-than-expected sales partially offset by stronger margins.
Sales of $8.4B (dn 14% y/y) were $1.4B below our model, mainly due to weakness
in the Energy subsegment. Margins expanded 290bps to a strong 19.8% (JPMe
18.6%). By subsegment, Energy revenues (-15% y/y) were significantly below our
model. Energy operating profits were up 3% y/y. Margins were stronger than
expected at 20.4% (JPMe 18.7%), expanding 370bps y/y. Energy orders rose by 2%
to $7.5B, and services orders were up 8%. For Oil & Gas, revenues of $1.8B (-9%
y/y) were 3% lower than our estimates. O&G orders were $1.7B, down 22% with
equipment down 44% while services up 15%. O&G profits were down 15% y/y.
14

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18 October 2010
Table 12: Energy Infrastructure Segment Performance

Y/Y % Change
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
Energy
Total Sales Growth
Profit Growth
Margin %
71%
53%
13.7%
-21%
-14%
16.7%
5%
16%
15.4%
-4%
12%
18.6%
-13%
7%
16.8%
-13%
6%
20.5%
-7%
12%
18.6%
-8%
3%
20.7%
-15%
4%
20.4%
Oil & Gas

Total Sales Growth
Profit Growth
Margin %
11%
29%
16.1%
-4%
22%
19.4%
1%
11%
11.6%
3%
11%
14.5%
3%
11%
17.3%
10%
4%
18.4%
3%
7%
12%
-9%
3%
16.5%
-9%
-15%
16.1%
Table 13: Energy Infrastructure Segment Orders

Y/Y % Change
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
Energy
Total Order Growth
Major Equip Orders
Services Order Growth
Thermal Order Growth
Gas Turbine Unit Orders
Wind Order Growth
Wind Turbine Unit Order
18%
21%
14%
~0%
33
50%
>1,000
0%
0%
0%
1%
70
5%
988
33%
-36%
4%
-53%
18
-8%
724
-26%
-62%
12%
-55%
25
-60%
216
-25%
-50%
9%
-46%
23
-43%
935
-6%
-22%
15%
-19%
40
-25%
585
-15%
-24%
-5%
-56%
10
-28%
494
+8%
+19%
0%
45%
42
7%
248
2%
-5%
8%
n/a
15
-15%
500
Oil & Gas

Major Equipment Orders
-12%
36%
-19%
2%
2%
-5%
-7%
-15%
6%
-5%
30%
30%
1%
19%
11%
-3%
-44%
15%
Tech Infrastructure misses on Aviation and Healthcare

Tech Infrastructure missed both on revs as well as margins. Revs of $9.2B (dn
1%y/y) were weaker versus our estimate of $9.4B, and margins of 16% (170bps
lower y/y) were 160bps below our model. Aviation revenues were down 3% y/y on
lower military unit shipments. Operating profit was down 17%. Overall Aviation
orders were up 10% y/y, with equipment orders growing strongly by 32% y/y.
Service orders were down by 6% during the quarter. Commercial spares orders were
up to 25% after adjusting for last years Aviall order. Healthcare revenues were up
4% y/y (equipment revs +5%, service +3%) and profits up 14%y/y. Overall orders
were up by 6% y/y with equipment orders up by 8% y/y, guided by strong growth in
clinical systems. Transportation revenues were down 10%y/y ($869mm vs. JPMe
$850mm) primarily on weak locomotive sales, with shipments declining to 96units
from 117 a year ago. Segment profit of $101mm was down 43%y/y, driven by lower
volume. Equipment orders saw strong growth of 400%, while service orders were up
15%y/y.
15

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18 October 2010
Table 14: Technology Infrastructure Segment Performance

Y/Y % Change
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
Aviation
Equipment Sales Growth
Services Sales Growth
Total Sales Growth
Profit Growth
Margin %
6%
-2%
2%
21%
22.5%
12%
11%
12%
39%
22.4%
-3%
0%
-6%
1%
20.0%
-10%
-2%
-6%
16%
21.4%
-21%
+8%
-8%
-18%
20%
-21%
-5%
-14%
-26%
19.2%
-4%
-11%
-8%
-5%
20.6%
-4%
-3%
-3%
-17%
18.3%
Healthcare
Sales Growth
Profit Growth
Margin %
-3%
-9%
19.5%
-9%
-22%
11.6%
-12%
-21%
14.9%
-9%
-20%
13.4%
-2%
-3%
19.4%
5%
21%
13.3%
3%
12%
16.1%
4%
14%
14.7%
Transportation
Equipment Sales Growth
Services Sales Growth
Total Sales Growth
Profit Growth
Margin %
-48%
-10%
20%
-16%
15.0%
-1%
5%
2%
-15%
18.5%
-17%
-6%
-11%
-2%
22.1%
-32%
-14%
-23%
-31%
18.2%
n/a
n/a
-56%
-174%
-25.4%
-50%
-20%
-35%
-47%
15.0%
-30%
-37%
-34%
-89%
3.7%
n/a
n/a
-10%
-43%
11.6%
Table 15: Technology Infrastructure Segment Orders

Y/Y % Change
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
Aviation
Major Equipment Order Growth
-26%
9%
-4%
18%
-44%
5%
-37%
1%
-48%
19%
-21%
-3%
-8%
-5%
32%
-6%
Transportation
-48%
-10%
-60%
19%
-71%
-38%
-23%
-43%
141%
-40%
51.7%
-37%
400%
-1%
400%
16%
Healthcare
-6%
1%
-11%
-2%
-15%
-3%
-13%
-1%
13%
7%
-2%
3%
9%
2%
8%
1%
NBCU misses by penny

NBC revs of $4.1B (JPMe $4.4B) remained flat y/y. Margins of 15.4% (JPMe
16.5%) contracted by 260bps y/y. Profits of $625mm were down 15% y/y (up 5%
excl one-time charges of $137mm in 2009). Consistent with previous quarters, Cable
remained strong (revenues +8%, profits +22%). Broadcast revenues of $1.4B were
down 2% and operating profits were down 80mm y/y, driven by significant
investment in prime time. Films and Parks had a strong quarter, with revenues up
16% and op profits up ~200%.
Table 16: NBCU Segment performance
Y/Y % Change
Sales Growth
Profit Growth
Margin %
3Q08
8%
10%
12.7%
4Q08
-3%
-6%
19.5%
1Q09
-2%
-45%
11.1%
2Q09
-8%
-41%
15.1%
3Q09
-20%
13%
17.9%
4Q09
-4%
-30%
14.1
1Q10
23%
-49%
4.6
2Q10
5%
13%
16.2
3Q10
0%
-15%
15.4
Home and Business Solutions in line

This segment was in line with our estimates, with revs of $2.13B down 1%y/y (JPMe
$2.23B). Margins of 4.9% were flat y/y, slightly below our estimates. Segment
profits were flat y/y. Lighting was strong (orders +9%), and profits were helped by
16

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18 October 2010
restructuring benefits. Appliance revs were down 4%y/y and orders were down 6%,
driven by continued weakness in contract channel.
Table 17: Home and Business Solutions Segment performance
Y/Y % Change
Sales Growth
Profit Growth
Margin %
1Q09
-22%
-69%
2.3 %
2Q09
-20%
-38%
4.1%
3Q09
-17%
189%
4.9 %
4Q09
-7%
212%
5.9 %
1Q10
1%
58%
3.7 %
2Q10
4%
59%
6.4%
3Q10
-1%
0%
4.9%
Capital Finance weaker than expected

Overall, Capital Finance earned $855mm in the quarter versus our expectation of
$923mm. This is partially a function of lower core GECS revenues, which came in at
$12.5B versus our expectation of ~$12.9B. This was partially offset by lower
provisions (~$200mm) and a higher-than-expected tax benefit of $387mm (JPMe
$200mm). Write-offs were lower than expected at $1.8B (JPMe $2.0B).
Table 18: 3Q10 GECS Key Metrics vs. JPM Estimates
$mm
GECS revenues
Interest expense
Provisions for losses on financing receivables
Write-offs
GECS Pretax income
Tax benefit (expense)
GECS net income
3Q10A
12,469
3,790
1,696
1,809
JPM(E)
12,925
3,753
1,903
20,50
Difference
-456
37
-207
-240
468
387
855
723
200
923
-255
187
-68
By segment, CLL led the strength in 3Q on the back of lower losses and
impairments. EFS came marginally ahead of our estimates, while GECAS was down
by $103mm due to the annual impairment review in the quarter. The Consumer
business saw profits of $826mm, driven by lower credit losses partially offset by
some lower assets. US retail finance earned $329mm. Although Real Estate remains
weak, it came in ahead of our estimates and better than 2Qs loss of $524mm.
Table 19: Capital Finance 3Q10 Subsegment Performance vs. JPM Estimates
Profits, $mm
Commercial Lending & Leasing (CLL)
Energy Financial Services
GECAS
Consumer
Real Estate
GE Capital
3Q10A
443
55
158
826
(405)
871
JPM(E)
327
53
261
821
(475)
830
Difference
116
2
(103)
5
70
41
Credit metrics saw improvement nearly across the board in 3Q, with the one
exception of Real Estate. Mortgage delinquencies were down 52 bps. Metrics in the
key commercial/consumer exposures improved meaningfully from 2Q, and total
Commercial nonearners are down ~$150mm on a dollar basis.
17

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18 October 2010
Table 20: GECS Portfolio Quality

4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
Equipment Leasing
Delinquency
Non-earners
2.17%
1.68%
2.84%
2.27%
2.78%
2.45%
3.01%
2.86%
2.81%
2.98%
2.71%
2.86%
2.50%
3.07%
2.26%
2.90%
Consumer, Total
30+ Delinquency
Non-earners
7.43%
3.33%
8.25%
4.24%
8.77%
4.75%
8.80%
4.78%
8.82%
4.92%
8.72%
4.75%
8.66%
4.79%
8.34%
4.67%
Consumer, Mortgage
30+ Delinquency
Non-earners
10.56%
5.47%
11.80%
6.81%
13.23%
7.79%
13.38%
7.78%
13.26%
7.74%
13.49%
8.23%
14.20%
8.72%
13.68%
8.63%
Consumer, Non-Mtg
30+ Delinquency
Non-earners
5.62%
1.75%
6.18%
2.20%
5.94%
2.24%
5.95%
2.33%
6.18%
2.69%
5.94%
2.72%
5.52%
2.56%
5.26%
2.39%
Real Estate
30+ Delinquency
Non-earners
1.15%
0.41%
2.24%
1.22%
4.03%
2.88%
4.19%
2.90%
4.33%
2.79%
4.97%
3.67
5.40%
3.68
5.74%
3.35
Table 21: GE Capital Nonearnings and Write-Offs

Y/Y % Change
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
GE Money
Non-Earnings
% Receivables
4,763
2.78%
4,750
3.33%
5,428
4.24%
6,593
4.71%
6,519
4.78%
6,504
4.94%
6,803
4.75%
6,350
4.79%
6,291
4.67%
Write-Offs
%ANI
1,033
2.04%
1,239
2.67%
1274
2.23
1,477
4.37%
1,418
4.10%
1,267
3.81%
1719
5.00%
1,542
4.47%
1,327
3.97%
Total GE Cap
Non-Earnings
% Receivables
7,335
1.72%
7,997
2.12%
10,049
2.79%
13,104
3.58%
13,808
3.88%
13,255
3.84%
13,637
3.73%
12,652
3.70%
12,278
3.61%
Write-Offs
%ANI
1,305
0.87%
1,985
1.36%
1,567
1.70%
1,915
2.11%
1,919
2.13%
1,929
2.20%
2,405
2.71%
2,168
2.45%
1,809
2.12%
Provisions
Prov/Write-offs
1,640
126%
3,065
154%
2,336
149%
2,817
147%
2,868
149%
2,907
151%
2,263
94%
2,009
92%
1,696
94%
Valuation & Rating Analysis

We remain Overweight. GE shares trade at ~10x our 2012E EPS of $1.65, a ~20%
discount to EE/MI peers. While GE has traditionally traded at a premium to the
group, we think a 10% discount is more appropriate going forward, with a discount
from Capital (1.3x tangible book) offsetting a premium from best-in-class Industrial
assets (15.5x, or ~10% premium to the group target of 14x). Our December 2011
price target of $21 is based on a 10% discount to the group target multiple of 14x
2012E EPS, also reconciled on the SOTP basis below.
18

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18 October 2010
Table 22: GE PT Detail

$ per share
Industrial EPS
GECS Implied
GECS implied P/E
Price Target
FY12E EPS
1.04
Tang BV/Sh
3.70
Multiple
15.5
Multiple
1.3
8.0
Per Share
16.19
Per Share
4.81
21.00
Risks to Our Rating and Price Target

Downside risks at GECS include: (1) a step-back in global unemployment and other
credit drivers; (2) tail risk around unforeseen regulatory action; (3) higher-thanexpected losses or impairments from real estate; and (4) further pressure on the
global financial system that hurts asset values or limits GECSs access to the
wholesale funding markets. Downside risks at Industrial include: (1) prolonged
weakness in global power markets that slows an earnings recovery; (2) weaker-thanexpected commercial air traffic that hurts Aviation services; (3) another leg down in
hospital capital equipment spending; and (4) continued weakness in film and
advertising markets.
19

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18 October 2010
Analyst Certification:
The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analysts compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures
Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for General
Electric Co. within the past 12 months.
Client of the Firm: General Electric Co. is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided
to the company investment banking services, non-investment banking securities-related service and non-securities-related services.
Investment Banking (past 12 months): J.P. Morgan received, in the past 12 months, compensation for investment banking services
from General Electric Co..
Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking
services in the next three months from General Electric Co..
Non-Investment Banking Compensation: JPMS has received compensation in the past 12 months for products or services other
than investment banking from General Electric Co.. An affiliate of JPMS has received compensation in the past 12 months for
products or services other than investment banking from General Electric Co..
J.P. Morgan and/or its affiliates are acting as financial advisor to General Electric Corp. (NYSE: GE) in connection with the signed
definitive agreement to form a joint venture that will be 51 percent owned by Comcast (NASDAQ: CMCSA, CMCSK), 49 percent
owned by GE and managed by Comcast. The announcement was made on December 3, 2009. The transaction has been approved by
the Board of Directors of GE and Comcast. It is subject to receipt of various regulatory approvals, including clearance under the
Hart-Scott-Rodino Antitrust Improvements Act, and approvals of the Federal Communications Commission and certain international
agencies. The transaction is also subject to other customary closing conditions. NBCU has obtained $9.85 billion of committed
financing through a consortium of banks led by J.P. Morgan, Goldman Sachs, Morgan Stanley, BofA Merrill Lynch and Citi.
General Electric Co. (GE) Price Chart

75
N $8
60
N $9
N
45
N $13
OW $17
N $12 OW $17 OW $22OW $23 OW $21
Price($)
30
15
0
Oct
06
Jul
07
Apr
08
Jan
09
Date
Rating Share Price Price Target

($)
($)
16-Jun-08
28.97
--
09-Dec-08
18.88
13.00
06-Feb-09
10.85
9.00
10-Mar-09
8.87
8.00
OW $20
Oct
09
12-May-09 N
13.68
12.00
08-Sep-09
13.87
17.00
OW
19-Oct-09
OW
16.08
17.00
16-Dec-09
OW
15.69
20.00
07-Jan-10
OW
15.45
22.00
19-Apr-10
OW
18.94
23.00
17-Aug-10
OW
15.46
21.00
Jul
10
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it
over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.
Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:

J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analysts (or the analysts teams) coverage universe.] J.P. Morgan Cazenoves UK Small/Mid-Cap dedicated research
analysts use the same rating categories; however, each stocks expected total return is compared to the expected total return of the FTSE
20

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18 October 2010
All Share Index, not to those analysts coverage universe. A list of these analysts is available on request. The analyst or analysts teams
coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying
analyst(s) coverage universe.
Coverage Universe: C. Stephen Tusa, Jr CFA: 3M (MMM), Danaher (DHR), Dover (DOV), Emerson Electric Co.
(EMR), Generac (GNRC), General Electric Co. (GE), Honeywell (HON), Hubbell Inc. (HUBB), ITT Corp. (ITT), Ingersoll
Rand (IR), Lennox International (LII), Rockwell Automation (ROK), Roper Industries (ROP), SPX Corp. (SPW), Sensata
(ST), Textron (TXT), Tyco International (TYC), WABCO (WBC), Watsco (WSO), Watts Water Technologies (WTS),
Wesco (WCC)
J.P. Morgan Equity Research Ratings Distribution, as of September 30, 2010
J.P. Morgan Global Equity Research

Coverage
IB clients*
JPMS Equity Research Coverage
IB clients*
Overweight
(buy)
46%
Neutral
(hold)
43%
Underweight
(sell)
12%
49%
43%
69%
45%
48%
60%
33%
8%
50%
*Percentage of investment banking clients in each rating category.

For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category.
Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on
any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on
the front of this note or your J.P. Morgan representative.
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include revenues from, among other business units, Institutional Equities and Investment Banking.
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18 October 2010
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This document is being provided for the exclusive use of UNIVERSIDAD ESAN at UNIVERSIDAD ESAN

North America Equity Research

General Electric Co.

Price Target: $21.00

Electrical Equipment and MultiIndustry

C. Stephen Tusa, Jr CFA

. . . while GECS fundamentals still on an upward trajectory. Improving credit

Source: Company data, Reuters, J.P. Morgan estimates.

See page 20 for analyst certification and important disclosures.

C. Stephen Tusa, Jr CFA

North America Equity Research

Table 2: Group Y/Y EPS Growth (JPM est)

% of total company sales

EPS growth y/y

Source: J.P. Morgan estimates.

Source: Company data, J.P. Morgan estimates.

C. Stephen Tusa, Jr CFA

North America Equity Research

C. Stephen Tusa, Jr CFA

North America Equity Research

between 2H05 and 2006) implies somewhere between $1.0B-1.5B in potential

Source: J.P. Morgan estimates.

Tweaking down 2011 estimate cheap stock with a wall of worry

C. Stephen Tusa, Jr CFA

North America Equity Research

Table 4: GE EPS Bridge, JPM(E)

Prior Year Industrial Sales

Implied $ Profit Incr/(Decr)

Source: Company reports, J.P. Morgan estimates.

Current Stock Price

Source: Bloomberg, J.P. Morgan estimates.

C. Stephen Tusa, Jr CFA

North America Equity Research

Table 6: SOTP Implies GE 5-10% Undervalued

Suggested value per share

Average of two analyses

Current stock price

C. Stephen Tusa, Jr CFA

North America Equity Research

Key Points on Industrial

Source: Company reports, J.P. Morgan estimates.

Importantly, looking ahead, we continue to believe we are close to bottom. Indeed,

C. Stephen Tusa, Jr CFA

North America Equity Research

Figure 1: GE Industrial Revenues

Source: Company reports.

Orders grow, led by aviation, while O&G orders slip

North America Equity Research

Figure 2: Major Equipment Orders

Figure 3: Services Orders Turn Positive

Total Major Equipment Orders

C. Stephen Tusa, Jr CFA

Serv ice Orders

Figure 4: Aviation Drives Most of the Equipment Order Growth in 3Q

Source: Company reports, J.P. Morgan estimates.

Pricing on Energy orders continues to slide despite positive value gap

C. Stephen Tusa, Jr CFA

North America Equity Research

Figure 5: Pricing Value Gap Still a Profit Driver, But Narrowing . . .

Energy Value Gap

Source: Company reports and J.P. Morgan estimates.

Figure 6: . . . and Pricing on New Energy Orders Moving Negative

Source: Company data.

Historically, pricing changes tend to follow orders, with a significant lag