General Electric lifted its 2023 guidance for earnings and free cash flow early Tuesday after quarterly results beat expectations. GE stock jumped out of buy range.
GE Earnings
Estimates: Analysts, on average, expected GE earnings per share of 46 cents on revenue of $14.762 billion. Year-over-year comparisons were muddied by the GEHC spinoff.
Results: GE earnings came in at 68 cents a share, up 89% from 36 cents a year ago, the Q2 release showed. Revenue rose 18% to $16.7 billion, the fifth straight quarter of accelerating top-line growth. Orders surged 59% to $22 billion. Profit margins expanded.
The company cited increased demand in the aerospace segment and record renewable energy orders. "We're increasingly operating as GE Aerospace and GE Vernova as we prepare to launch these two independent companies sometime in early 2024," CEO Larry Culp said in the release.
The jet-engine business delivered double-digit growth in orders, revenue, and operating profit, the company said. Commercial Leap engine sales grew during the quarter, as well as defense engine sales. Commercial services grew on the back of increased spare part sales and internal shop visits.
GE narrowed losses in renewable energy by 14% and grew profits in the power segment by 18%.
In addition, 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, before the Q2 beat.
GE has also guided 2023 organic revenue growth in the low double digits vs. its old target of the high single digits. It now sees free cash flow of $4.1 billion-$4.6 billion, up from $3.6 billion-$4.2 billion.
GE Stock, RTX Stock
GE stock jumped 6.3% to 117.16 in Tuesday's stock market trading, moving out of buy range. On Monday, shares dipped two cents to 110.31. Shares of the soon-to-be aerospace pure play have ridden short-term support at their 21-day exponential moving average. In late June, shares dipped to rebound from the 50-day moving average, clearing a 108.90 buy point from a three-weeks-tight pattern. The buy zone went to 114.35.
Jet-engine rival Raytheon Technologies on Tuesday reported new problems with a geared turbofan engine model. RTX stock sank 10.2%.
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GE Aerospace: Improving Supply Chains
Both GE and Raytheon report improvements in the aerospace supply chain.
The jet-engine suppliers are trying to ramp up output of newer products, like GE's Leap and Raytheon's geared turbofan, which powers Boeing and Airbus aircraft. Availability of materials and workers remains an issue.
GE spun out General Electric HealthCare Technologies late last year. It plans to spin out its energy unit, as GE Vernova, in early 2024. That will allow GE Aerospace, the so-called jewel in the portfolio, to emerge as a stand-alone company.
Analysts are watching progress on the spinout of GE's more challenging energy business, which competes with Siemens Energy.
Amid these cross-currents, excitement about GE Aerospace has sent GE shares to a five-year-plus high.
Year to date, GE stock is up 79%, including a 19% jump in the past three months.
Among other industrial stocks, 3M on Tuesday joined Roper Technologies with a quarterly beat-and-raise report. Dover missed some estimates.
Also on Tuesday, GE HealthCare Technologies posted a 7% Q2 revenue gain.
