General Electric Stock Slides After Q1 Earnings Beat, 2022 Guide
Updated at 12:28 pm EST
General Electric (GE) – Get General Electric Company Report posted better-than-expected first quarter earnings Tuesday, while confirming its full-year profit guidance and noting that its historic plans to split the group into three separate companies remains on track.
Shares were pressured in early trading, however, after CEO Larry Culp said supply chain demand and inflation pressures were likely to persist into the current quarter, noting the full-year profit forecast will is trending towards the lower end of its January guidance.
General Electric said adjusted non-GAAP earnings for the three months ending in March were pegged at 24 cents per share, a figure that was essentially flat to last year but ahead of the Street consensus forecast of 19 cents per share.
Group revenues, General Electric said, were also little-changed from last year at $17 billion, but came in modestly higher than analysts’ estimates of a $16.9 billion tally. Free cash flow was pegged at $880 million.
GE confirmed its 2022 forecasts, which it first published in January and reiterated last month saying it expects adjusted earnings in the region of $2.80 to $3.50 per share for the full year — albeit at the lower end — while generating free cash flow in the region of $5.5 billion to $6.5 billion, a figure that will improve to $7 billion in 2023.
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Supply chain and cost pressures are likely to last into at least the second half of the year, GE said in March, noting that the “magnitude” of these challenges would pressure growth profit and free cash flow growth as well.
“This quarter, the GE team improved services, orders, and cash while scaling lean in all businesses to drive margin expansion,” Culp said. “Our continuous operational improvements set us up to reinvest in innovation across GE, and our businesses remain focused on growth, supported by continued recovery at Aviation and strong demand at Healthcare.”
“We’re holding the outlook range we shared in January, but as we continue to work through inflation and other evolving pressures, we’re currently trending toward the low end of the range,” he added. “Importantly, we remain on track to launch three independent, investment-grade companies with leading positions in growing, critical sectors, well positioned to create long-term value.”
GE shares were marked 11% lower in mid-day trading Tuesday following the earnings release to change hands at $79.98 each, a move that would extend the stock’s year-to-date gain to around 17.8%.
The group also noted it’s on track to split the iconic group into three separate ‘investment grade’ companies, a plan that was unveiled last year and marks one of the most significant changes in the industrial giant’s 130-year history.
General Electric will form three different companies — focusing on energy, healthcare and aviation — with current CEO Larry Culp tabbed as non-executive chairman of the developing healthcare group — which will be run by Peter Arduini — when it is spun-off in 2023.
