General Electric hoisted its full-year earnings and free cash flow guidance above Wall Street consensus Tuesday after an overall beat for the third quarter, led by commercial aerospace strength. GE stock flashed a bullish signal while jumping toward a buy point.
Management also mapped out time and listing details of the company's planned emergence as an aerospace pure-play entity.
"At GE Aerospace, we continue to experience rapid growth driven by robust demand and solid execution, largely in commercial engines and services," GE CEO Larry Culp said in the earnings release Tuesday.
Notably, both GE's grid and onshore wind businesses were profitable during the quarter. "With our two largest renewable energy businesses delivering and Power's continued strength, we remain highly confident in GE Vernova's spin-off next year," Culp added.
General Electric Earnings
Estimates: Analysts had expected GE earnings of 56 cents a share on revenue of $15.458 billion, according to FactSet. Year-over-year comparisons were muddied by a health care spinoff.
Results: GE earnings came in at 82 cents, well above views. That compared to a 17-cent loss a year ago, the earnings release showed. Sales were $16.5 billion, up 18%.
In Q3, profits jumped 33% and revenue surged 25% in GE Aerospace, which will soon be an independent company.
The renewable energy business, which will be part of the upcoming GE Vernova, cut Q3 losses by 66%, year over year, as revenue grew 15%. The power or gas turbine business, also forming GE Vernova, saw profits soar 69%, with revenue up 13%.
Free cash flow swelled to $1.672 billion in the quarter, well above consensus of $1.1 billion.
Outlook: The company on Tuesday raised its full-year EPS guidance to $2.55-$2.65, up 15% at the high end from its prior view. Management also guided revenue growth in the "low teens" and free cash flow to $4.7 billion-$5.1 billion.
Prior to the report, Wall Street had projected full-year EPS of $2.36, FactSet shows. That was above the high end of GE's prior guidance for $2.10-$2.30, as of July. General Electric had previously guided 2023 revenue growth in the "low double digits" and free cash flow of $4.1 billion-$4.6 billion.
On Tuesday, GE also raised its segment-level growth and profit guidance.
GE Stock
In stock market action Tuesday, GE stock shot up 6.5% in big volume to 113.60, regaining the 50-day moving average. The relative strength line for GE stock hit its best level in the past year, a positive technical sign. That is marked by a blue dot at the end of the RS line on the daily and weekly MarketSmith charts. Shares of the soon-to-be aerospace stock edged up 0.6% on Monday ahead of earnings, after three down days.
GE stock now sits about 4% below a 117.96 buy point from a flat base, according to MarketSmith chart analysis. The flat base, which has formed since July, is a sign of resilience in a choppy stock market. Overall market conditions remain challenging and discourage new purchases. But investors could build watchlists for the next uptrend.
GE Aerospace, GE Vernova Details
GE spun out General Electric HealthCare Technologies late last year.
The icon of American industry on Tuesday said it aims to spin out its power and renewable energy unit, as GE Vernova, at the beginning of the second quarter of 2024. The move will allow the "new GE" to emerge as an independent, aerospace-focused company — and bring GE's long-running breakup to a close.
The spun off outfit will list on the New York Stock Exchange under the trading symbol GEV. GE Aerospace will continue on the NYSE under the existing GE ticker.
GE Aerospace is often called the crown jewel in GE's once-vast portfolio of businesses. It makes jet engines and aviation systems for commercial, military and business aircraft. GE's power and renewable energy businesses face a number of various challenges.
"We'll be watching GE's progress for how close onshore wind is to breaking even, the mix of North American vs. international projects, and how the grid has progressed on margins," Morningstar analyst Joshua Aguilar wrote on Oct. 17.
A profitable renewables business would smooth the way for Vernova's spinout. In turn, that would pave the way for the emergence of GE Aerospace.
GE's jet-engine business has benefited from the recovery in commercial air travel. It suffered from global travel restrictions during the coronavirus pandemic.
But airline and aerospace companies are bracing for potential adverse impact from the new Israel-Hamas war. That could squelch demand for air travel again.
General Electric and RTX, formerly Raytheon, supply jet engines to plane makers like Boeing and Airbus. Notably, GE's Leap engine powers the Boeing 737 Max and Airbus A320neo jets.
RTX also reported Q3 earnings Tuesday. Boeing reports Wednesday and GEHC on Oct. 31.
As anticipation built for GE Aerospace, GE stock rallied strongly in the first half of 2023. It began consolidating in the late summer and is now up more than 73% year to date, though still 4% below its July high.
