- Analysts estimate adjusted EPS of $0.02 vs. $0.04 for Q1 FY 2020.
- Revenue is expected to fall YOY for the 11th straight quarter.
- The COVID-19 pandemic and slowing economy have heavily impacted GE's key businesses, including its aviation business.
General Electric Co. (GE), known as GE to investors, has suffered steep earnings and revenue declines in recent quarters amid the slowing economy and impact of the COVID-19 pandemic. The pandemic has had an especially severe impact on GE's aviation business.
Investors will look closely for any signs of a turnaround when the company reports earnings on April 27 before market open for Q1 FY 2021. The news may not be good. Analysts expect adjusted earnings per share (EPS) to plunge on declining revenue.
Investors also will closely watch a key metric: revenue growth at GE's renewable energy unit, one of the company's main businesses, which has grown significantly in recent years. The company's renewable energy arm could benefit further as the Biden administration aims to implement several major initiatives aimed at addressing climate change. The growth of GE's renewable energy business stalled in recent quarters due to the pandemic, and analysts expect a slight revenue decline in Q1 YOY.
After largely trading sideways between May and September in 2020, GE stock began a major rally in October which continued through March of 2021. The company's stock rise may have been driven in part by optimism in broader economic recovery in the latter months of 2020. The rally has slowed in recent weeks, but GE shares, nonetheless, have significantly outperformed the broader market. GE stock has provided a 1-year trailing total return of 108.8% as compared with 49.4% for the S&P 500.
GE Earnings History
GE has struggled to post consistent profit growth even prior to onset of the COVID-19 pandemic. The company has reported YOY increases in adjusted earnings per share in only three of the last 12 quarters, with most of the steepest declines taking place throughout FY 2020. For Q1 FY 2021, analysts estimate adjusted EPS of $0.02, which would be down 51.6% from a year earlier. It also would be the lowest quarterly adjusted EPS for GE in at least three years, excluding Q2 2020, when it posted a loss.
GE's revenue performance has been worse. Revenue has fallen for 10 straight quarters. Most striking, revenue has fallen by between a low of about 17% and a high of more than 24% in seven of those 10 quarters. For Q1 FY 2021, analysts expect revenue to fall 14.7% YOY for an 11th straight decline. Also, the estimated Q1 drop would be twice as steep as the 7.6% decline in Q1 2020.
|GE Key Stats|
|Estimate for Q1 FY 2021||Q1 FY 2020||Q1 FY 2019|
|Adjusted EPS ($)||0.02||0.04||0.13|
|Renewable Energy Revenue ($B)||3.2||3.2||2.5|
The Key Metric
As mentioned above, investors also will focus on revenue generated by GE's renewable energy business, which includes the company's wind, hydro, solar, and other renewable energy solutions. GE has increased its focus on its renewable energy business in recent years as it has shed legacy units including its lightbulb business, which was created by GE's legendary founder and inventor Thomas Edison more than 130 years ago. As a result, GE's renewable energy business has grown much faster than the company's overall revenue in recent years. GE's renewable energy unit could see sharply accelerated growth with the Biden administration's increased focus on renewable energy.
GE's renewable energy revenue has grown more steadily than the company overall. The renewable energy business increased revenue in nine of the past 12 quarters through Q4 FY 2020. The business posted revenue growth ranging from 12.9% and 60.7% in seven of those quarters. The overall growth trend stalled in FY 2020. Last year, GE's renewable energy unit reported YOY declines in Q2 and Q4 FY 2020 along with a small gain in Q3. Analysts predict that the company's renewable energy revenue will remain stalled. In Q1 FY 2021, they expect a YOY decline of 1.1%. For the full year 2021, the prospects look brighter. Analysts expect growth to accelerate, with renewable energy posting revenue growth of 5.7%. That would be the best growth in three years.
CNBC. "General Electric shares pop on better-than-expected industrial cash flow, rosy outlook." Accessed April 25, 2021.
Reuters. "GE warns of more job cuts at aviation business amid sluggish recovery." Accessed April 25, 2021.
GE. "GE 1st Quarter 2021 Earnings Webcast." Accessed April 26, 2021.
Visible Alpha. "Visible Alpha." Accessed April 26, 2021.
General Electric Co. "Renewable Energy." Accessed April 25, 2021.
The Wall Street Journal. "GE Exits Lightbulb Business It Pioneered." Accessed April 25, 2021.