GE set to report final earnings before collapse

General Electric Co. is due to release its final quarterly results next week ahead of the breakup, with the industrial conglomerate expected to report its highest earnings since the start of the COVID pandemic.

Before opening on January 24, GE,
+1.07%
it will publish fourth-quarter results before the end of 2022. On January 3, the company completed the spin-off of its healthcare business, GE HealthCare Technologies Inc. gehc,
+4.43%.
The spin-off of GE Vernova, which brings together GE’s renewable energy, electricity, digital technology and energy financial services businesses, is not expected to be completed until early 2024. After that, GE will be known as GE Aerospace.

GE HealthCare must report results on January 30, before the first call.

GE stock has risen sharply in recent months, and analysts’ fourth-quarter earnings expectations have rebounded despite a surge in economic data showing contraction in industrial and manufacturing activity. However, Wall Street’s estimates of earnings and free cash flow, closely monitored by GE’s financials, may be the best indicator of the economic climate as they have worsened in recent months.

The average analyst estimate, compiled by FactSet for adjusted earnings per share, which excludes one-off items, rose to $1.15, from 94 cents at the end of the third quarter, according to the latest data. If GE matches this forecast, it will be the highest earnings per share since $1.31 was reported in the fourth quarter of 2019.

In October, GE said in its third-quarter earnings report that it expects its 2022 adjusted organic margin to increase by 1.25 to 1.50 percentage points, comparable to a 1 percentage point year-on-year increase in the first nine months of 2022. This means that the company expected the profitability of products and services sold, excluding non-recurring items, to increase in the fourth quarter.

Meanwhile, shares are up 41% over the past three months, including a 16% increase after the spin-off of GE HealthCare was completed. This compares to a 14% increase in the Industrial Select Sector SPDR XLI exchange-traded fund.
+1.39%
and SPX S&P 500,
+1.89%
7.5% profit for the same period.

The FactSet consensus on revenue is down to $21.25 billion from $21.41 billion at the end of September, but this still represents the largest revenue since the $21.93 billion recorded in the fourth quarter of 2020.

The free cash flow estimate, GE’s closely watched financial metric, fell to $3.98 billion from $4.35 billion at the end of the third quarter. But that would still be the highest free cash flow since the $4.36 billion recorded in the fourth quarter of 2020.

Here is a breakdown of expected earnings for each of GE’s business segments:

  • Aviation: $7.56 billion, the highest since Q4 2019

  • Capacity: $5.32 billion, the highest since the fourth quarter of 2020.

  • Healthcare: $4.92 billion, the highest since the fourth quarter of 2019.

  • Renewable Energy: $3.77 billion, highest since Q4 2021.

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