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General Electric (GE) to Post Q4 Earnings: What's in Store?

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General Electric Company (GE - Free Report) is scheduled to report fourth-quarter 2018 results on Jan 31, before the market opens.

This industrial conglomerate’s financial performance in the last four quarters was mixed, having recorded better-than-expected results in two and lagging estimates in the other two. The company’s average earnings surprise was a positive 3.53%. In the last reported quarter, the company’s earnings of 14 cents lagged the Zacks Consensus Estimate of 21 cents by 33.33%.

The company’s share price movements were not impressive. In the past three months, the stock price decreased 10% compared with the industry’s decline of 1.1%.

Let us see how things are shaping up for General Electric this quarter.

Factors Influencing GE’s Performance

General Electric’s third-quarter results were disappointing as the bottom line lagged estimates and declined on a year-over-year basis. Weakness in the Power segment was one of the major reasons behind poor performance in that quarter and prevailing headwinds might be a concern for the fourth quarter as well. The Power segment has been losing grounds to increasing popularity of renewable energy sources, macroeconomic challenges, overcapacity in the industry and geopolitical tensions.

To revive the ailing segment, General Electric announced plans to split the power businesses in two — one with gas product and services groups, and the other comprising steam, grid solutions, power conversion and nuclear businesses — in October 2018. Also, the company still stands by the restructuring plan of June 2018 that will evolve it into a high-tech industrial company focused on Aviation, Power and Renewable Energy.

General Electric’s Aviation business gains from healthy growth in air travel globally as well as from increased shipments of LEAP engines and rise in air freight volumes. Conversely, Renewable Energy benefits from project builds and improvement in shipments while the Oil & Gas segment benefits from increasing onshore activities and Healthcare gain from the rising emerging market business. However, the Transportation segment is dealing with weakening locomotive end markets.

It is worth mentioning here that General Electric intends to reduce structural costs in excess of $2 billion in 2018. However, exposure in the finance sector and high debts has been troubling.

The Zacks Consensus Estimate for the Industrial segment’s revenues in the to-be-reported quarter is currently pegged at $30,987 million, reflecting decline of 3.8% from the previous year’s $32,214 million. Profit for the Industrial segment is likely to decrease 10.9% year over year to $3,156 million.

GE Capital’s Zacks Consensus Estimate for sales the fourth quarter is pegged at $1,992 million, down from $2,473 million reported in the previous quarter and up from $1,545 million generated in the year-ago quarter.

Earnings Whispers

Our proven model provides some idea about stocks that are about to release their earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with General Electric has been provided below.

Earnings ESP: General Electric has an Earnings ESP of 0.00%, with both the Most Accurate Estimate and the Zacks Consensus Estimate pegged at 18 cents.

General Electric Company Price, Consensus and EPS Surprise


General Electric Company Price, Consensus and EPS Surprise | General Electric Company Quote

Zacks Rank: General Electric currently carries a Zacks Rank #3.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks That Warrant a Look

One company in the industry that you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter.

Griffon Corporation (GFF - Free Report) currently carries a Zacks Rank #3 and has an Earnings ESP of +37.50%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Two companies in the Zacks Industrial Products sector that is likely to post upbeat earnings results this quarter is Colfax Corporation (CFX - Free Report) and Nordson Corporation (NDSN - Free Report) .

Colfax currently carries a Zacks Rank #2 and has an Earnings ESP of +1.43%.

Nordson currently carries a Zacks Rank #3 and has an Earnings ESP of +4.82%.

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