General Electric reported third-quarter earnings that beat Wall Street expectations though its guidance for the fourth quarter was very conservative. GE reported $18.4 billion in sales and earnings of 57 cents per share against Wall Street’s expectations of 43 cents in per-share earnings from $19.3 billion in sales.
General Electric stock was up 1.4% in premarket trading. S&P 500 and Dow Jones Industrial Average futures were up 0.4% and 0.3%, respectively.
GE believes sales will be flat for the next year. Full-year earnings guidance were put at about 74 cents in fourth-quarter earnings. Wall Street pegged it at 86 cents.
Guidance for cash flow from industrial operations was unchanged at about $4.3 billion.
CEO Larry Culp said in the company’s news release: “Orders grew, margins expanded, our overall cash performance was significantly better, and Aviation is building momentum and showing continued signs of recovery,” he said. “The teams are managing through a challenging operating environment, including global supply chain disruptions and onshore wind market pressure due to the U.S. Production Tax Credit.”
Margins say experts have improved due to higher-margin service sales rather than through new orders. Service sales rose about 7%, while equipment sales dropped about 9%.
Supply chain woes have hit almost all industries hard. The aviation and automotive industries were particularly affected. Culp told Barron’s supply-chain disruptions have some divisions working with “one arm tied behind their backs.”
GE’s aviation orders have done better than overall sales. They stood at $6.9 billion, better than third-quarter sales at $5.4 billion. Covid-19 led to massive losses for commercial aerospace with orders either being abandoned or delayed. Though things have improved somewhat with economies and lockdowns easing up, but over the past month, commercial air travel in the U.S. remains down about 23% compared with prepandemic 2019.
Looking ahead, Culp added in the interview that the supply-chain problems won’t get better soon, probably until the middle of 2022.
In related news, GE announced this week that it would split into three public companies handling aviation, healthcare and energy, respectively.
The split marks the end of the 129-year-old conglomerate that at one time had 13 operating segments under its umbrella, including media, plastic, to insurance.
“This is the best way to fully realize the potential of these businesses,” Culp said in an interview. The splits will bring more focus to the individual operations with separate boards having industry-specific expertise, benefiting customers and broadening the investor base, he added.
The Boston-based company said it will combine GE Renewable Energy, GE Power, and GE Digital and spin off the business in early 2024. GE will also separate the healthcare company, with a retaining stake of 19.9%, in early 2023.
GE has already sold off its locomotive and home appliances business, its oil-and-gas business operations, and most of its once massive financial services arm after the 2008 financial crisis.
