Key Takeaways

  • Analysts estimate adjusted EPS of $0.03 vs. -$0.16 for Q2 FY 2020.
  • Aviation segment revenue is expected to post its first increase in six quarters.
  • Companywide revenue in Q2 is expected to improve YOY for the first time in three years.

General Electric Co. (GE) has suffered a string of earnings declines, losses and falling revenue during the COVID-19 pandemic and resulting economic disruption. That poor performance has come amid GE's massive restructuring over the past several years, which has included selling assets and paying down debt. GE may raise more than $20 billion on the coming sale of its aircraft leasing unit, and some analysts expect GE to exit its healthcare business as well.

Investors will watch for signs of a turnaround when GE's reports earnings for Q2 FY 2021 on July 27 before market open. Analysts anticipate improvement on a year-over-year (YOY) basis, with both adjusted earnings per share (EPS) and revenue rising.

Investors are also likely to look at the performance of GE's aviation segment revenue, a key metric. This portion of GE's business is closely tied to the airline industry, which has begun to recover following severe disruption earlier in the pandemic. Consensus estimates predict that GE's aviation segment revenue will increase YOY for the first time since Q4 FY 2019.

GE shares lagged behind the market from mid-July through October last year before surging ahead around the company's Q3 FY 2020 earnings release. Since early November, the stock has dramatically outpaced the market, although it has generally traded sideways since March 2021. As of July 21, GE shares have provided a 1-year trailing total return of 86.6%, far ahead of the S&P 500's total return of 33.8%.

One Year Total Return for S&P 500 and GE
Source: TradingView.

GE Earnings History

GE's adjusted EPS tumbled early in the pandemic, dropping significantly in Q1 FY 2020. That was followed by a loss for the first time in at least 10 quarters for Q2 FY 2020. Even before the pandemic, profit improvement was elusive, as GE posted YOY declines for five quarters in FY 2018 and FY 2019. Adjusted EPS improved on a sequential basis for Q3 and Q4 FY 2020, but the company still posted substantial YOY declines for each of those quarters. Q1 FY 2021 saw another YOY and sequential decline. Now investors expect that adjusted EPS will be $0.03 for Q2 FY 2021, compared with a loss one year prior.

GE also has faced significant challenges in growing revenue. The company posted 11 consecutive quarters of YOY revenue declines, beginning in Q3 FY 2018. With the exception of Q2 FY 2020, which marked the biggest YOY drop of the past several years, declines during the pandemic have been more modest than those in late FY 2018 and early FY 2019. Investors estimate that Q2 FY 2021 will see the first YOY improvement in revenue since Q2 FY 2018. Nonetheless, that revenue number still will the lowest in the past 14 quarters other than Q1 FY 2021 and Q2 FY 2020.

GE Key Stats
  Estimate for Q2 FY 2021 Q2 FY 2020 Q2 FY 2019
Adjusted Earnings Per Share $0.03 -$0.16 $0.16
Revenue (billions) $18.0 $17.8 $23.4
Aviation Segment Revenue (billions) $5.2 $4.4 $7.9

Source: Visible Alpha

The Key Metric

As mentioned, investors will also monitor revenue generated by GE's aviation segment, which designs and manufactures aircraft engines, components, power, and other systems for both commercial and military applications. GE's aviation business is dependent on the airline and aviation industries, both of which are highly recovery-dependent. These industries have begun to recover thanks in large part to COVID-19 vaccinations and customers being more willing to plan travel. As a result, GE's aviation revenue could spike. Further, because the company's aviation business is tied with recovery, a strong showing in this area could be evidence of a robust recovery more broadly.

GE's aviation revenue declined beginning in Q1 FY 2020 after 8 consecutive quarters of YOY gains. Revenue then plunged 44.3% in Q2 FY 2020, the worst performance in recent years. That was followed by steep drops over the next three quarters through Q1 FY 2021, though the size of the declines narrowed. Overall, the company has seen five consecutive quarters of YOY aviation revenue declines through the first quarter of this year. Analysts expect this trend to reverse in Q2 FY 2021. They estimate a 19% increase in revenue growth, which would be the highest rate since Q4 FY 2018.