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General Electric (GE) Down 14% in a Year: What's Ailing It?

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Shares of General Electric (GE - Free Report) have declined approximately 14% over the past year compared with the industry’s 11.7% decrease. This was primarily due to supply-chain disruptions, cost inflation and weakness in the Renewable Energy segment.

 

Zacks Investment Research
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Supply-chain disruptions, including labor and material shortages, and high logistics costs, are hurting General Electric’s operations. These, among other headwinds, affected the company’s fourth-quarter performance by about 4 percentage points. While pricing actions are driving the company’s margin performance, raw material cost inflation, especially at shorter cycle businesses, is partly offsetting it. The company expects inflationary pressure to be a major challenge in 2023.

Weakness in the Renewable Energy segment has plagued General Electric throughout 2022. Lower US onshore wind volumes and continued pressure from the onshore North America market dynamics are weighing on orders in the Renewable Energy segment. Revenues in the segment fell 17% year over year in 2022, with a 19% decline in orders. Inflationary pressure is weighing on the segment’s margin performance.

With the onshore wind unit grappling with weak demand, General Electric has laid off hundreds of workers in North America, Latin America, the Middle East and Africa. The company expects to reduce headcount by 20% sequentially at the unit in 2023.

Given General Electric’s geographical diversification, adverse foreign currency movement is weighing on its top line. This too, is expected to have dragged on its shares. In 2022, the impact of forex woes on total revenues was $2 billion.

Zacks Rank & Stocks to Consider

General Electric presently carries a Zacks Rank #5 (Strong Sell).

Here are some better-ranked stocks for your consideration:

Parker-Hannifin (PH - Free Report) currently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 9.1%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.

Parker-Hannifin has an estimated earnings growth rate of 3.7% for fiscal 2023. The stock has gained 17.1% in the past year.

Valmont Industries (VMI - Free Report) currently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 11.6%, on average.

Valmont Industries has an estimated earnings growth rate of 13.9% for the current year. The stock has jumped 36.8% in a year.


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