Back to top

Image: Bigstock

Will Aviation & Renewable Energy Aid GE's Q2 Earnings?

Read MoreHide Full Article

General Electric Company (GE - Free Report) is scheduled to report second-quarter 2018 results on Jul 20, before the market opens. The company’s Aviation segment is likely to benefit from rising global air travel while Renewable Energy is anticipated to enjoy growth in unit orders.

In terms of corporate revenues, GE Aviation is one of the largest business units of the company — accounting for 24.8% of revenues in first-quarter 2018. On the other hand, the company’s Renewable Energy segment contributed 5.7% of the quarter’s revenues.

Q1 Segmental Performance, Estimates for Q2

Aviation’s performance in first-quarter 2018 was impressive, with revenues increasing 7% year over year. Orders grew 13% over the year-ago quarter, including 18% growth in equipment orders and 10% rise in services orders. Notably, shipments of LEAP engines grew roughly 142% year over year.

The company anticipates continued strength in the Aviation segment on the back of strengthening global passenger air travel. It’s worth noting that revenue passenger kilometers (RPK) have strengthened over time. Also, rise in air freight volumes, solid spares performance and cost-reduction initiatives remain encouraging.

The segment’s top line surpassed the Zacks Consensus Estimate by 0.30% in the first quarter. It’s worth noting here that the segment pulled off a positive average surprise of 0.60% in the past four quarters.

For the second quarter of 2018, the Zacks Consensus Estimate for Aviation’s revenues is pegged at $7,264 million, above $7,112 million recorded in the last reported quarter and $6,532 million generated in the year-ago quarter.

Renewable Energy segment’s revenues in the first quarter declined 7% year over year due to lower Onshore Wind equipment shipments. Orders and backlog gained 15% and 8%, respectively. For 2018, the company anticipates product demand to remain solid; anticipating high-single-digit to double-digit growth in unit order. Though pricing remains an issue with wind turbines, the company’s cost-savings actions will be advantageous. These aspects might have played a similar role in the second quarter.

For the second quarter of 2018, the Zacks Consensus Estimate for Renewable Energy revenues is pegged at $1,988 million, above $1,646 million recorded in the last reported quarter.

Overall Q2 Expectations

The Zacks Consensus Estimate for the Industrial segment revenues in the to-be-reported quarter is currently pegged at $28,009 million, reflecting growth of 2.2% from the previous quarter’s figure of $27,395 million. Profit for the industrial segment is likely to increase 21.9%, sequentially, to $3,262 million. (Read more: General Electric (GE - Free Report) to Report Q2 Earnings: What to Expect?)

Moving Ahead

Last month, the company disclosed plans to restructure its business portfolio, enabling it to become a high-tech industrial company. Its prime area of focus will be its Aviation, Power and Renewable Energy businesses. The company anticipates realizing corporate savings of more than $500 million by 2020, resulting from the implementation of the new GE Operating System. Moreover, for its Industrial business, it intends on reducing debt by $25 billion by 2020.

Other stocks from the industry that are likely to soon report their second-quarter 2018 earnings include 3M Company (MMM - Free Report) , Honeywell International Inc. (HON - Free Report) and United Technologies Corporation . While Honeywell International will release results on Jul 20, both 3M Company and United Technologies will report on Jul 24.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


General Electric Company (GE) - free report >>

Honeywell International Inc. (HON) - free report >>

3M Company (MMM) - free report >>

Published in