General Electric (GE) lifted its 2023 earnings and free cash flow guidance on Tuesday after quarterly results beat expectations. GE stock rose solidly, breaking out of the buy range.
Estimates: Analysts on average had expected GE earnings per share of 46 cents on revenue of $14.762 billion. Year-over-year comparisons were muddied by the GEHC fallout.
Results: GE’s earnings were 68 cents per share, up 89% from 36 cents a year ago, according to the second-quarter release. Revenue increased 18% to $16.7 billion, the fifth consecutive quarter of accelerating revenue growth. Orders jumped 59% to $22 billion. Profit margins have increased.
The company cited increased demand in the aerospace segment and is seeing renewable energy orders. “We increasingly operate as GE Aerospace and GE Vernova as we prepare to launch these two independent companies in early 2024,” CEO Larry Culp said in the statement.
The jet engine business posted double-digit growth in orders, revenue and operating profit, the company said. Leap commercial engine sales increased in the quarter, as did defense engine sales. Commercial services grew thanks to increased sales of spare parts and internal store visits.
GE reduced losses in renewables by 14% and increased profits in the electricity segment by 18%.
Additionally, 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, ahead of the second-quarter beatdown.
GE also guided 2023 organic revenue growth in double digits versus its former target of high single digits. He now sees free cash flow of $4.1 billion to $4.6 billion, down from $3.6 billion to $4.2 billion.
GE shares jumped 5.8% to 116.63 on Tuesday stock market trading, exiting the buy range. On Monday, shares fell two cents to 110.31. Stocks in the pure future aerospace game have increased short-term support at their 21-day exponential moving average. In late June, they dipped to bounce off the 50-day moving average, clearing 108.90. point of purchase from a tight three-week pattern. The buy zone moved to 114.35.
GE Aerospace: Improving Supply Chains
At the recent Paris Air Show, GE and Raytheon Technologies (GE) reported improvements in the aerospace supply chain.
Jet engine rivals are trying to ramp up production of new products, like GE’s Leap engine, which powers Boeing (BA) 737 aircraft. The availability of materials and workers remains an issue.
RBC Capital Markets analysts predict second-quarter growth for General Electric, led by jet engine business. They also expect GE’s full-year earnings forecast to rise. Company analyst Deane Dray said in a July 12 report that he expects GE to “benefit from the burgeoning rebound in commercial aerospace.”
GE broke up General Electric Healthcare Technologies (GEHC) at the end of last year. It plans to divest its energy business, as GE Vernova, in early 2024. This will allow GE Aerospace, the so-called jewel of the portfolioto become a stand-alone business.
Analysts are monitoring the progress of the spin-off of GE’s tougher energy business.
“We will listen (on GE’s earnings call) to see if any of the wind turbine quality issues recently reported to Siemens (HEAD OFFICE) have surfaced at GE, to any degree,” Dray said.
Amid these ripples, enthusiasm for GE Aerospace propelled GE shares to a more than five-year high.
Year-to-date, GE stock is up 68.7%, including a 10.1% jump in the past three months.
Tuesday, 3M (MMM) joined GE and Roper Technologies (ORP) with quarterly beat and raise reports. Dover (DVV) missed some estimates. GE HealthCare Technologies recorded a 7% increase in sales in the second quarter.
MMM stock jumped on Tuesday while GEHC edged higher. Dover went down and Roper relieved a fraction.
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