|GE Earnings Results|
|Metric||Beat/Miss/Match||Reported Value||Analysts' Predictions|
|Adjusted Earnings Per Share||Beat||$0.05||$0.03|
|Aviation Revenue (billions)||Miss||$4.8||$5.2|
Source: Predictions based on analysts' consensus from Visible Alpha
- Aviation revenue climbed year over year but fell short of analyst expectations.
- Slow recovery in aviation revenue could indicate a less robust overall recovery from the COVID-19 pandemic.
- GE continues an aggressive plan to solidify its financial position, with gross debt reduction of more than $70 billion since the end of FY 2018.
GE Financial Results: Analysis
General Electric Company (GE) reported overall strong earnings for Q2 FY 2021. Adjusted earnings per share (EPS) and revenue both exceeded analyst expectations for the quarter. Adjusted EPS of $0.05 marked the most significant reversal year over year (YOY), compared with adjusted losses of -$0.14 for Q2 FY 2020 at the height of the COVID-19 pandemic. Revenue climbed YOY for the first time in three years to $18.3 billion, also beating analyst predictions. Performance was driven in part by improvement in total orders, which climbed by about 33% YOY, and in the company's Healthcare business.
GE's Key Metric: Aviation Revenue
GE's aviation segment is considered a key overall metric for the company, because it is closely tied to the airline industry, which has begun to recover following severe disruption earlier in the COVID-19 pandemic. Signs of a strong recovery in the company's aviation business could point to robust overall recovery from the pandemic. Aviation revenues increased by 10.4% YOY to $4.8 billion. This is the first YOY improvement in this area since Q4 FY 2019. However, it falls short of analyst predictions of 19.0% YOY growth to $5.2 billion.
GE's aviation business growth was driven by commercial engines and commercial services growth YOY, while military orders decreased over the same period as a result of supply chain challenges and timing. That GE missed analyst predictions in aviation revenue may suggest that recovery has been less robust than predicted or that it is taking place more slowly.
GE's Guidance and Stock Performance
GE increased its overall 2021 outlook for industrial free cash flow, from a previous range of $2.5-$4.5 billion up to $3.5-$5.0 billion. The company reiterated its total company outlook for adjusted EPS of $0.15 to $0.25 and for industrial revenues to grow in the low-single-digit range.
Shares of GE dipped by under 1.0% and then recovered slightly, dropping overall by under 0.3% in after-hours trading immediately following the release of the earnings report. The company's stock has skyrocketed by about 93.3% over the past year.
GE Earnings Call Recap
Although GE raised its outlook for industrial free cash flow for 2021, the company anticipates challenges. In an interview with CNBC, CEO Larry Culp said that GE is "not immune from ... inflationary pressures," which he expects to increase over the remainder of the year. He added that Q2 earnings would have been stronger if not for these pressures as well.
Culp said that GE's mitigation measures include price increases, more effective sourcing of parts and materials, waste reduction, and improved productivity. However, GE anticipates a supply chain slowdown to remain through 2022.
Next Earnings Report
GE's next earnings report is estimated to be released on Oct. 15, 2021.
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General Electric Co. "GE ANNOUNCES SECOND QUARTER 2021 RESULTS," Page 3. Accessed July 27, 2021.
General Electric Co. "GE ANNOUNCES SECOND QUARTER 2021 RESULTS," Page 5. Accessed July 27, 2021.
CNBC. "GE warns of inflationary pressure after lifting cash flow estimate." Accessed July 27, 2021.
MarketScreener. "GENERAL ELECTRIC COMPANY (GE)." Accessed July 26, 2021