General Electric (GE) lifted its 2023 guidance for earnings and free cash flow early Tuesday after quarterly results beat expectations. GE stock, already in buy range, popped.
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GE Earnings
Estimates: Analysts, on average, expected GE earnings per share of 46 cents on revenue of $14.762 billion. Year-over-year comparisons were muddied by the GEHC spinoff.
Results: GE earnings came in at 68 cents a share, up 89% from 36 cents a year ago, an earnings release showed. Revenue came in at $16.7 billion, increasing 18% vs. a year earlier. Orders surged 59% to $22 billion. Profit margins expanded.
The company cited increased demand in the aerospace segment and record renewable energy orders. “We’re increasingly operating as GE Aerospace and GE Vernova as we prepare to launch these two independent companies sometime in early 2024,” CEO Larry Culp said in the release.
The jet-engine business delivered double-digit growth in orders, revenue, and operating profit, the company said. Commercial Leap engine sales grew during the quarter, as well as defense engine sales. Commercial services grew on the back of increased spare part sales and internal shop visits.
GE narrowed losses in renewable energy by 14% and grew profits in the power segment by 18%.
In addition, GE monetized 32% of its stake in GE HealthCare for total proceeds of $2.2 billion.
Outlook: GE raised its full-year EPS estimate to $2.10-$2.30 from $1.70-$2. Wall Street had forecast GE earnings per share of $2.06, before the Q2 beat.
GE has also guided 2023 organic revenue growth in the low double digits vs. its old target of the high single digits. It now sees free cash flow of $4.1 billion-$4.6 billion, up from $3.6 billion-$4.2 billion.
GE Stock
GE stock jumped 5.2% to 115.85 in Tuesday’s stock market trading, moving out of buy range. On Monday, shares dipped two cents to 110.31. Shares of the soon-to-be aerospace pure play have ridden short-term support at their 21-day exponential moving average. In late June, they dipped to rebound from the 50-day moving average, clearing a 108.90 buy point from a three-weeks-tight pattern. The buy zone went to 114.35.
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GE Aerospace: Improving Supply Chains
At the recent Paris Air Show, both GE and Raytheon Technologies (GE) signaled improvements in the aerospace supply chain.
The jet-engine rivals are trying to ramp up output of newer products, like GE’s Leap engine, which powers Boeing (BA) 737 aircraft. Availability of materials and workers remains an issue.
Analysts at RBC Capital Markets anticipate Q2 growth for General Electric, driven by the jet-engine business. They also expect higher GE earnings guidance for the full year. The firm’s analyst Deane Dray said in a July 12 report that he expects GE “to benefit from the nascent rebound in commercial aerospace.”
GE spun out General Electric HealthCare Technologies (GEHC) late last year. It plans to spin out its energy business, as GE Vernova, in early 2024. That will allow GE Aerospace, the so-called jewel in the portfolio, to emerge as a stand-alone company.
Analysts are watching progress on the spinout of GE’s more challenging energy business.
“We will be listening (on the GE earnings call) to see if any of the recently reported wind turbine quality issues at Siemens (SIEGY) have surfaced at GE, to any degree,” Dray said.
Amid these cross-currents, excitement about GE Aerospace has sent GE shares to a five-year-plus high.
Year to date, GE stock is up 68.7%, including a 10.1% jump in the past three months.
On Tuesday, 3M (MMM) joined GE and Roper Technologies (ROP) with quarterly beat-and-raise reports. Dover (DOV) missed some estimates. GE HealthCare Technologies posted a 7% Q2 revenue gain.
MMM stock jumped Tuesday while GEHC edged up. Dover tumbled and Roper eased a fraction.
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