GE Earnings Are Strong. What to Expect for the Stock.

The company raised full-year earnings guidance to a range of $2.55 to $2.65 a share, up from prior guidance of $2.10 to $2.30. What’s more, free cash flow is now expected to come in at about $4.9 billion, up from prior guidance of about $4.4 billion.

Results are a repeat of the second quarter when GE reported EPS of 68 cents from sales of $15.9 billion. Wall Street was looking for 46 cents a share. GE also increased full-year EPS guidance to a range of $2.10 to $2.30 from a prior range of $1.70 to $2. The forecasted 2023 free cash flow was raised to about $4.4 billion from $3.8 billion.

GE stock was up 5.3% shortly after the results were released Tuesday.
S&P 500
and
Dow Jones Industrial Average
futures were both up 0.5%.

Earnings had a high bar to clear. Through Monday trading, shares were up more than 85% over the past 12 months. The S&P 500 and Dow were up closer to 10% and 5%, respectively.

It looks as if GE cleared the bar. “We expect GE to boost its 2023 EPS guidance range, moving from a range of $2.10 to $2.30 to $2.25 to $2.35,” wrote RBC analyst Deane Dray in a preview report. “This compares to our estimate of $2.25 and consensus of $2.35.”

The guidance increase put the new midpoint at $2.60, which is 30 cents above Dray’s projection.

Timing for the planned spinoff of GE’s renewable power and gas power generation businesses called GE Vernova is expected to be completed in the second quarter of 2024. The prior guidance was sometime early in 2024. There is a little more certainty around timing, but the second quarter might not be considered early by some investors.

GE announced some Vernova leadership appointments in late August.

Investors can listen for spin updates when management hosts a conference call at 7:30 a.m. Eastern time to discuss results.

After the Vernova spinoff, GE will become GE Aerospace, a dominant maker of aircraft engines. On the conference call, investors will also be looking for an update on the health of commercial aviation, and whether rising interest rates are hurting demand for items that are ordered years in advance, such as jet engines and power turbines.

Rates don’t appear to be hurting results. Aerospace orders came in at $9.8 billion, above sales of $8.4 billion. Orders at GE Vernova came in right around sales.

The aerospace unit also posted operating profit margins of 20.4%, up from 19.1% a year ago. Gas power generation margins were 6%, up from 4% a year ago. The renewable power division is still losing money. It posted an operating profit of negative 7.6%. Still, that is an improvement over the negative 26% a year ago.

Write to Al Root at [email protected]