General Electric (NYSE:GE) announced a surprise increase in second-quarter profit, confounding expectations for continued cash burn. This news caused GE (NYSE:GE) shares to surge early on Tuesday. A move above a crucial level was indicated by the rise in GE (NYSE:GE) shares before the opening.
GE Earnings
Estimates: According to FactSet, the industrial giant was predicted to report a 6.5% EPS to fall to 37 cents as year-over-year comparisons become more challenging. The amount of revenue increased by 3.2% to $17.457 billion. GE (NYSE:GE) was projected to lose $806.4 million in cash, slightly improving from the $880 million negative free cash flow in the first quarter. The cash flow of General Electric typically improves in the second half of the year.
Results: GE’s earnings unexpectedly increased to 76 cents per share. Revenue after adjustments increased to $17.88 billion. $162 million in free cash flow belied expectations of a cash drain.
Outlook: In the GE (NYSE:GE) earnings statement, CEO Lawrence Culp said they continue to trend toward the low end of our 2022 outlook on all metrics except cash, which is lower due to the timing of working capital and Renewable Energy-related orders. GE (NYSE:GE) provided a 2022 projection in April that was at the low end of its prior range, which included EPS of $2.80–3.50 and FCF (free cash flow) of $5.5–6.5 billion. Before the Q2 surprise, analysts had projected GE (NYSE:GE) earnings to increase by 62 % to $2.77 for 2022.
GE Stock
In pre-opening trade on Tuesday’s stock market, shares increased by almost 5%. GE (NYSE:GE) increased its winning streak to seven sessions on Monday by gaining 0.25 % to 68.36 after earlier in the month it hit 20-month lows. The price of GE (NYSE:GE) shares increased 8.5% last week, settling barely below the declining 10-week moving average and significantly below the 40-week average.
GE’s historic split, the “Wall of Worry.”
On July 18, GE (NYSE:GE) announced the three public firms that would emerge in 2023–2024: GE (NYSE:GE) Aviation, GE (NYSE:GE) HealthCare, and GE (NYSE:GE) Versova. The company also stated that its historic separation is still on track (housing its power and renewable energy businesses). After years of expensive reorganization efforts, General Electric initially revealed the major breakup last October. Investors lost interest in the conglomerate business model as well.
The new GE (NYSE:GE) will concentrate on aviation, similar to Raytheon Technologies (NYSE:RTX). 3M (NYSE:MMM) and Raytheon (NYSE:RTX) also report early on Tuesday. Compared to its rivals, Raytheon (NYSE:RTX) gained 0.4% on Monday. Nearly little change occurred in 3M (NYSE:MMM) stock. Roper Technologies (NYSE:ROP) increased by 0.6%. For aircraft manufacturers like troubled Boeing (NYSE:BA), which pumped out jet contracts at last week’s Farnborough International Airshow, both GE (NYSE:GE) and Raytheon (NYSE:RTX) produce jet engines. Wednesday morning updates from Boeing (NYSE:BA).
The second quarter results from multi-industry businesses will be focused on any inflection in orders or commentary, according to a note from RBC Capital Markets analyst Deane Dray to clients dated July 13.
Dray said that the Wall of Worry continues to ratchet higher, fueled by inflation fears, supply chain disruptions, worsening chip shortages, China Covid shutdowns, Russia-Ukraine war, Fed tightening, and a stronger U.S. dollar.
The analyst continued by saying there was a growing likelihood of a recession. He said, “The ISM continues to decelerate, with the June ISM (manufacturing index) still in expansion, but New Orders slipped below 50 for the first time since May 2020.”
Featured Image: Megapixl © Elantsev
