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GE (GE) Down 0.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for General Electric (GE - Free Report) . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is GE due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
General Electric Beats Q2 Earnings Estimates, Hikes View
General Electric has delivered better-than-expected results for second-quarter 2021. Its earnings surpassed estimates by 66.67%, while sales beat the same by 0.03% or $6 million.
Results reflected a year-over-year improvement in the Industrial free cash flow performance, growth in adjusted earnings, and gains from solid product and service offerings. The company increased the projection for Industrial free cash, while maintained the same for 2021 earnings.
In the reported quarter, the industrial conglomerate’s adjusted earnings were 5 cents per share, surpassing the Zacks Consensus Estimate of 3 cents. Also, the bottom line improved from the year-ago loss of 14 cents per share.
Revenue Details
In the quarter under review, General Electric’s consolidated revenues were $18,279 million, reflecting year-over-year growth of 8.8%. Healthy sales performance in Industrial boosted the quarterly results, partially offset by a decline in GE Capital.
The company’s top line surpassed the Zacks Consensus Estimate of $18,273 million.
On a segmental basis, its Industrial revenues increased 8.8% year over year to $17,487 million. Also, GE Capital’s revenues totaled $858 million, decreasing 0.3% year over year.
For the Industrial segment, organic revenues in the quarter increased 7% from the year-ago quarter to $16,917 million. Industrial orders expanded 33% year over year to $18.3 billion. Organically, orders were up 30%.
The performance of the Industrial segment’s components business is discussed below:
Aviation revenues increased 10% year over year to $4,840 million and orders grew 47%. Organically, growth rates for revenues and orders were the same at 10% and 47%, respectively.
The segment benefited from a 23.7% year-over-year increase in Commercial Engines & Services revenues, partially offset by a 13.3% decline in Military and a 2.7% decrease in Systems & Other revenues.
Healthcare revenues in the reported quarter totaled $4,454 million, increasing 14% year over year. The segment’s orders grew 14%. On an organic basis, revenues increased 10% and orders grew 11%.
The segment gained from an 11.1% increase in Healthcare Systems and 45.7% growth in Pharmaceutical Diagnostics revenues.
Renewable Energy revenues totaled $4,049 million, up 16% year over year. Its orders increased 7% in the reported quarter. Organically, the segment’s sales were up 9% year over year, while orders grew 5%.
The segment’s Onshore Wind sales grew 15.9% year over year, while Grid Solutions equipment and services revenues were down 4.4%. Hydro revenues increased 28.5% year over year and Offshore Wind and Hybrid Solutions revenues expanded 263% year over year.
The Power segment’s revenues increased 3% year over year to $4,295 million. Organically, sales were flat from the year-ago quarter. The segment’s orders increased 67% year over year (or grew 63% organically).
Gas Power revenues decreased 0.9% to $3,049 million, while that for Steam Power grew 8.9% and for Power Conversion, Nuclear and other expanded 31.3%.
Margin Profile
In the quarter under review, General Electric’s cost of sales was down 0.1% year over year to $13,618 million. It represented 74.5% of the quarter’s revenues versus 81.1% in the year-ago quarter. Selling, general and administrative expenses in the quarter decreased 6.6% to $2,866 million. It was 15.7% of the quarter’s revenues versus 18.3% in the year-ago quarter.
Research and development expenses totaled $604 million, reflecting a year-over-year decline of 1.1%. It represented 3.3% of the quarter’s revenues versus 3.6% in the year-ago quarter.
The Industrial segment’s adjusted operating profit was $934 million as against ($666) million in the year-ago quarter. Margin in the quarter was 5.3% against (4.1%) in the second quarter of 2020.
On a reported basis, the Power segment recorded operating earnings of $299 million, reflecting an improvement from a loss of $50 million in the year-ago quarter. Renewable Energy recorded a loss of $99 million compared with a loss of $251 million in second-quarter 2020. The Aviation segment’s earnings were $176 million versus ($687) million in the year-ago quarter. The Healthcare segment’s profits increased 58% to $801 million.
The GE Capital segment witnessed a loss of $1,141 million compared with a loss of $1,459 million in the year-ago quarter.
Interest and other financial charges decreased 13% to $488 million.
Balance Sheet and Cash Flow
Exiting the second quarter of 2021, General Electric had cash and cash equivalents of $22.5 billion, down 29.4% from $31.8 billion recorded at the end of the previous quarter. Borrowings were $59.2 billion, down 11.5% from $66.9 billion at the end of the first quarter.
Non-GAAP free cash flow for GE Industrial totaled $388 million in the second quarter as against ($2,067) million in the year-ago quarter.
Efforts are on track to reduce the exposure to the GE Capital business. Asset disposition totaled $9.7 billion in the first half of 2021.
Outlook
For 2021, the company anticipates Industrial’s organic revenue growth in low-single digits (maintained from the previously mentioned range), while its adjusted organic margin is predicted to expand 250 basis points (maintained). Industrial free cash flow will likely be $3.5-$5.0 billion, higher than $2.5-$4.5 billion mentioned previously.
Adjusted earnings per share for the year are anticipated to be 15-25 cents (maintained).
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -9.23% due to these changes.
VGM Scores
At this time, GE has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, GE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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GE (GE) Down 0.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for General Electric (GE - Free Report) . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is GE due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
General Electric Beats Q2 Earnings Estimates, Hikes View
General Electric has delivered better-than-expected results for second-quarter 2021. Its earnings surpassed estimates by 66.67%, while sales beat the same by 0.03% or $6 million.
Results reflected a year-over-year improvement in the Industrial free cash flow performance, growth in adjusted earnings, and gains from solid product and service offerings. The company increased the projection for Industrial free cash, while maintained the same for 2021 earnings.
In the reported quarter, the industrial conglomerate’s adjusted earnings were 5 cents per share, surpassing the Zacks Consensus Estimate of 3 cents. Also, the bottom line improved from the year-ago loss of 14 cents per share.
Revenue Details
In the quarter under review, General Electric’s consolidated revenues were $18,279 million, reflecting year-over-year growth of 8.8%. Healthy sales performance in Industrial boosted the quarterly results, partially offset by a decline in GE Capital.
The company’s top line surpassed the Zacks Consensus Estimate of $18,273 million.
On a segmental basis, its Industrial revenues increased 8.8% year over year to $17,487 million. Also, GE Capital’s revenues totaled $858 million, decreasing 0.3% year over year.
For the Industrial segment, organic revenues in the quarter increased 7% from the year-ago quarter to $16,917 million. Industrial orders expanded 33% year over year to $18.3 billion. Organically, orders were up 30%.
The performance of the Industrial segment’s components business is discussed below:
Aviation revenues increased 10% year over year to $4,840 million and orders grew 47%. Organically, growth rates for revenues and orders were the same at 10% and 47%, respectively.
The segment benefited from a 23.7% year-over-year increase in Commercial Engines & Services revenues, partially offset by a 13.3% decline in Military and a 2.7% decrease in Systems & Other revenues.
Healthcare revenues in the reported quarter totaled $4,454 million, increasing 14% year over year. The segment’s orders grew 14%. On an organic basis, revenues increased 10% and orders grew 11%.
The segment gained from an 11.1% increase in Healthcare Systems and 45.7% growth in Pharmaceutical Diagnostics revenues.
Renewable Energy revenues totaled $4,049 million, up 16% year over year. Its orders increased 7% in the reported quarter. Organically, the segment’s sales were up 9% year over year, while orders grew 5%.
The segment’s Onshore Wind sales grew 15.9% year over year, while Grid Solutions equipment and services revenues were down 4.4%. Hydro revenues increased 28.5% year over year and Offshore Wind and Hybrid Solutions revenues expanded 263% year over year.
The Power segment’s revenues increased 3% year over year to $4,295 million. Organically, sales were flat from the year-ago quarter. The segment’s orders increased 67% year over year (or grew 63% organically).
Gas Power revenues decreased 0.9% to $3,049 million, while that for Steam Power grew 8.9% and for Power Conversion, Nuclear and other expanded 31.3%.
Margin Profile
In the quarter under review, General Electric’s cost of sales was down 0.1% year over year to $13,618 million. It represented 74.5% of the quarter’s revenues versus 81.1% in the year-ago quarter. Selling, general and administrative expenses in the quarter decreased 6.6% to $2,866 million. It was 15.7% of the quarter’s revenues versus 18.3% in the year-ago quarter.
Research and development expenses totaled $604 million, reflecting a year-over-year decline of 1.1%. It represented 3.3% of the quarter’s revenues versus 3.6% in the year-ago quarter.
The Industrial segment’s adjusted operating profit was $934 million as against ($666) million in the year-ago quarter. Margin in the quarter was 5.3% against (4.1%) in the second quarter of 2020.
On a reported basis, the Power segment recorded operating earnings of $299 million, reflecting an improvement from a loss of $50 million in the year-ago quarter. Renewable Energy recorded a loss of $99 million compared with a loss of $251 million in second-quarter 2020. The Aviation segment’s earnings were $176 million versus ($687) million in the year-ago quarter. The Healthcare segment’s profits increased 58% to $801 million.
The GE Capital segment witnessed a loss of $1,141 million compared with a loss of $1,459 million in the year-ago quarter.
Interest and other financial charges decreased 13% to $488 million.
Balance Sheet and Cash Flow
Exiting the second quarter of 2021, General Electric had cash and cash equivalents of $22.5 billion, down 29.4% from $31.8 billion recorded at the end of the previous quarter. Borrowings were $59.2 billion, down 11.5% from $66.9 billion at the end of the first quarter.
Non-GAAP free cash flow for GE Industrial totaled $388 million in the second quarter as against ($2,067) million in the year-ago quarter.
Efforts are on track to reduce the exposure to the GE Capital business. Asset disposition totaled $9.7 billion in the first half of 2021.
Outlook
For 2021, the company anticipates Industrial’s organic revenue growth in low-single digits (maintained from the previously mentioned range), while its adjusted organic margin is predicted to expand 250 basis points (maintained). Industrial free cash flow will likely be $3.5-$5.0 billion, higher than $2.5-$4.5 billion mentioned previously.
Adjusted earnings per share for the year are anticipated to be 15-25 cents (maintained).
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -9.23% due to these changes.
VGM Scores
At this time, GE has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, GE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.