- Analysts estimate adjusted EPS of $0.39 vs. $0.23 in Q2 FY 2021.
- Healthcare revenue is expected to fall modestly YOY.
- Revenue is predicted to decline for a fourth consecutive quarter.
General Electric Co. (GE), known as "GE," has experienced declining revenue in all but two quarters in the past four years as it's gone through a series of restructurings. This poor performance has been a key factor in GE's decision to split into three separate publicly traded companies during the next several years. GE announced in mid-July the brand names for the three future companies. The healthcare division will be called GE Healthcare; the gas power, renewable energy, and digital assets businesses will combine to form GE Vernova, and its aerospace business will be called GE Aerospace. Some analysts wonder whether the split will improve the performance of these businesses.
Investors will be watching to see how these changes are affecting GE's current performance when the company reports earnings on July 26, 2022 for Q2 FY 2022. Analysts expect that GE's adjusted earnings per share (EPS) will post strong growth (YOY). Revenue is expected to drop YOY for the fourth consecutive quarter.
Investors will also be watching GE's healthcare revenue. This key metric indicates how much revenue the company generates from its Healthcare segment. Healthcare will be the first of GE's business lines to spin off and form an independent company, in early 2023. Analysts expect GE's healthcare revenue to fall marginally YOY.
GE shares have underperformed relative to the broader market over the last year. After trading roughly in line with the S&P 500 in the summer and early fall of 2021. Then the stock spiked briefly in November, and since then has been on a gradual, sustained decline marked by brief advances. Surrounding the company's Q1 FY 2022 earnings release in April, the shares plunged further, then dropped again in June. As of July 23, GE shares have provided a 1-year trailing total return of -32.6%, well behind the S&P's total return of -9.3%.
GE Earnings History
GE has struggled to maintain consistent adjusted EPS growth in recent years. Between Q2 FY 2018 and Q2 FY 2021, the company reported just two quarters of YOY adjusted EPS growth: Q3 and Q4 FY 2019, then posted a loss in Q2 FY 2020. Beginning in Q3 FY 2021, though, GE reversed this trend and began to post a string of three YOY adjusted EPS increases. In Q1 FY 2022, adjusted EPS soared 86.8%. Analysts expect Q2 FY 2022 adjusted EPS to be similarly strong, rising 70.3% YOY.
GE's revenue has largely failed to make a similar recovery in recent quarters. Even prior to the pandemic, GE saw a long series of revenue declines beginning in Q3 FY 2018 and extending through Q1 FY 2021. GE experienced steep declines in revenue during all four quarters of FY 2020 and in Q1 FY 2021 amid the global pandemic. Revenue rebounded briefly in Q2 FY 2021, but has posted three straight quarterly declines since then. Despite this, the recent quarterly declines have been much smaller than GE experienced in the years 2019 2020. Analysts expect revenue to fall 4.0% for Q2 FY 2022.
|GE Key Stats|
|Estimate for Q2 FY 2022||Q2 FY 2021||Q2 FY 2020|
|Adjusted Earnings Per Share ($)||0.39||0.23||-1.11|
|Healthcare Revenue ($B)||4.4||4.5||3.9|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be focused on GE's healthcare revenue. GE's Healthcare segment provides healthcare technologies such as medical imaging, patient monitoring, diagnostics, drug discovery, and similar services. GE's healthcare products and services are primarily sold to hospitals and medical facilities around the world. While it is not the largest of GE's businesses by revenue, the Healthcare segment will be the first of three GE's business to go through the spinoff process. Early success by the independent company GE Healthcare could provide much-needed momentum for the subsequent two spinoffs, occurring in the months to follow.
GE's Healthcare segment revenue has posted erratic revenue growth in recent years. In the last four years back to Q2 FY 2018, the Healthcare segment has reported YOY declines in revenue for nine out of 16 quarters. It posted revenue declines in three of four quarters in both FY 2020 and also 2021, then reported a 1.3% revenue gain in Q1 FY 2022. Now, analysts estimate that healthcare revenue will drop by a small margin, 0.8% YOY, in Q2 FY 2022.
General Electric Co. "GE Unveils Brand Names for Three Planned Future Public Companies."
Visible Alpha. "Financial Data."
Washington Post. "It's Time for GE to Let Go of GE."
General Electric Co. "GE Events & Reports."
General Electric Co. "Form 10-K for the fiscal year ended December 31, 2021," Page 10, 12.