General Electric Company (GE Quick QuoteGE - Free Report) has disappointed with weaker-than-expected results for fourth-quarter 2021. Its earnings lagged the Zacks Consensus Estimate by 1.2%. This came in after three consecutive quarters of an earnings beat. The company’s quarterly sales also lagged estimates by 4.3%.

The industrial conglomerate’s adjusted earnings were 82 cents per share in the fourth quarter, lagging the Zacks Consensus Estimate of 83 cents. However, the bottom line improved 67.3% from the year-ago figure of 49 cents.

For 2021, the company’s adjusted earnings were $1.71, below the Zacks Consensus Estimate of $2.01. On a year-over-year basis, the bottom line improved from the year-ago loss per share of 7 cents.

Revenue Details

In the quarter under review, General Electric’s consolidated revenues were $20,303 million, reflecting a year-over-year decline of 3.5%. The quarterly sales suffered from weakness in the Healthcare, Power and Renewable Energy segments. A gain in Aviation was a relief.

The company’s top line lagged the Zacks Consensus Estimate of $21,216 million.

The performance of Aviation, Healthcare, Renewable Energy, and Power is discussed below:

Aviation revenues increased 4% year over year to $6,080 million and orders grew 22%. Organically, growth rates for revenues and orders were 4% and 22%, respectively. The high volume of shop visits significantly benefited Commercial Services revenues, partially offset by adecline in Commercial Engines and Military revenues due to lower shipments.

Healthcare revenues in the reported quarter totaled $4,625 million, decreasing 4.2% year over year. The segment’s orders grew 6%. On an organic basis, revenues decreased 4% and orders grew 7%.The segment suffered from a 5% decrease in Healthcare Systems organic sales, partially offset by 2% growth in Pharmaceutical Diagnostics revenues. Supply shortages in the industry played spoilsport in the quarter.

Renewable Energy revenues totaled $4,192 million, down 5.6% year over year. Its orders decreased 23% in the reported quarter. Organically, the segment’s sales were down 5% year over year, while orders decreased 21%. Weakness in Onshore Wind and Offshore Wind revenues, as well as softness in Grid, impacted the segment’s performance. Growth in services revenues was a relief.

The Power segment’s revenues were down 13.4% year over year at $4,661 million. Organically, sales decreased 10% from the year-ago quarter. The segment’s orders decreased 23% year over year (or were down 21% organically). The segment suffered from weakness in Gas Power and Steam Power.

It is worth noting here that Industrial revenues decreased 3.8% year over year to $19,499 million. Organic revenues were down 3% from the year-ago quarter to $19,610 million. Industrial orders decreased 5% year over year to $22.1 billion. Organically, orders were down 4%.

For 2021, the company’s revenues were $74.2 billion, down 2% year over year. Supply-chain issues, and woes with the U.S. wind production tax credit and commercial selectivity impacted the results. The top line also lagged the Zacks Consensus Estimate of $75.1 billion.

Margin Profile

In the quarter under review, General Electric’s cost of sales was down 9.1% year over year to $14,338 million. It represented 70.6% of the quarter’s revenues versus 75% in the year-ago quarter. Selling, general and administrative expenses decreased 1.4% to $3,202 million. It was 15.8% of the quarter’s revenues versus 15.4% in the year-ago quarter. Research and development expenses totaled $705 million, reflecting a year-over-year increase of 11%. It represented 3.5% of the quarter’s revenues versus 3% in the year-ago quarter.

The Industrial’s adjusted operating profit was $1,751 million, up 36% year over year. Margin in the quarter was 9%, up 260 basis points year over year.

On a reported basis, the Power segment recorded operating earnings of $309 million, reflecting an improvement of 1% from the year-ago quarter. Renewable Energy recorded a loss of $312 million compared with a loss of $87 million in fourth-quarter 2020. The Aviation segment’s earnings were $1,218 million versus $564 million in the year-ago quarter. The Healthcare segment’s profits decreased 20% to $762 million.

Interest and other financial charges increased 1.2% year over year to $426 million.

Balance Sheet and Cash Flow

Exiting the fourth quarter of 2021, General Electric had cash and cash equivalents of $15.8 billion, down from $25 billion recorded at the end of the previous quarter. Borrowings were $30.8 billion, down from $57.4 billion at the end of the third quarter.

Non-GAAP free cash flow for GE Industrial totaled $3,822 million in the fourth quarter, down from $4,367 million in the year-ago quarter.

Outlook

For 2022, General Electric anticipates organic revenue growth in high-single digits on a year-over-year basis. Adjusted organic profit margin is predicted to expand 150 bps from the previous year.

Free cash flow will likely be $5.5-$6.54 billion for the year. Adjusted earnings per share for the year are anticipated to be $2.80-$3.50 per share, suggesting a rise from $1.71 recorded in 2021.

Aviation revenues are predicted to grow >20% year over year in 2022 on the back of a recovery in the commercial market. Healthcare sales are anticipated to expand in the low-to mid-single digits as product introductions and commercial efforts yield synergies. Renewable Energy sales are expected to expand in low-single digits year over year on the back of an increase in Offshore Wind and better Onshore Wind. Power sales are predicted to benefit from the service performance. Inflation is predicted to continue impacting the performance, especially in Onshore Wind.