Second-quarter earnings at
General Electric
needed to be good. They didn’t disappoint.
Every part of the business showed improvement. There isn’t much for investors to nitpick, and as a result, shares are jumping in early trading.
Tuesday morning,
GE
(ticker: GE) reported adjusted earnings of 68 cents a share from $15.9 billion in sales. Wall Street was looking for earnings of 46 cents from sales of $14.8 billion.
The company reported adjusted per-share earnings of 27 cents from adjusted sales of $13.7 billion in this year’s first quarter and adjusted profit of 61 cents a share from sales of $17.9 billion in the second quarter of 2022.
Sales and earnings are down year over year, but this is the second quarter reported since GE spun off its healthcare operation, now known as
GE HealthCare Technologies
(GEHC), in early January.
All of GE’s businesses made headway. In aerospace, orders rose 37% year over year. Sales rose 28% while profit margins improved. In GE’s gas power business, orders grew 7%. Sales were just about flat, but profits jumped 18% year over year on improving profit margins.
GE’s wind power business still loses money, but it is losing less money. What’s more, new orders came in at a record $8.3 billion, up from $3.1 billion in the second quarter of 2022. Margin on the new orders should be better than for the existing business, CEO Larry Culp tells Barron’s.
The wind business has been tough for years. There are even reasons for optimism there.
Improvement is showing up in bottom-line numbers. For the full year, GE now expects to earn between $2.10 and $2.30 a share. In April, GE said 2023 adjusted earnings should fall between $1.70 and $2 a share. The $2.20 midpoint of the new guidance is 35 cents above the old midpoint of $1.85, and the 35-cent increase is more than the 22 cents by which GE beat second-quarter estimates.
Full-year free cash flow guidance was raised too. GE now expects to generate free cash flow of roughly $4.3 billion, up from prior guidance calling for about $3.9 billion.
Investors appear to be happy. Shares are up 4.4% in early trading.
S&P 500
futures gained 0.1% and
Dow Jones Industrial Average
futures were flat.
There was a high bar for this earnings report. Shares have been on fire. Coming into Tuesday trading, GE shares were up roughly 36% over the past six months, 66% so far this year, and 107% over the past 52 weeks. Improving profitability and free cash flow as well as two big spinoffs—GE Healthcare and GE’s energy business coming in early 2024—are reasons investors are more optimistic.
By comparison, shares of another aerospace-centered industrial conglomerate,
RTX
(RTX), are down about 2% over the past six months, down about 4% year to date, and up about 3% over the past year.
Just like investors, Wall Street is feeling good about GE these days. Coming into the secon-quarter earnings report, analysts were projecting per-share earnngs of $2.06 for the year, more than 20 cents above the midpoint of the range the company had forecast. That isn’t typical. Analysts generally listen to management teams.
It turns out that analysts were a little conservative. The new midpoint of the EPS guidance range is 14 cents above their mark.
Write to Al Root at [email protected]
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