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Why Is GE (GE) Up 1.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for General Electric (GE - Free Report) . Shares have added about 1.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is GE due for a pullback? 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 catalysts.
General Electric Q1 Earnings Top Estimates, Revenues Lag
General Electric has reported mixed results for first-quarter 2021. Its earnings surpassed estimates by 50%, while the sales lagged the same by 2.6%.
Results reflected a year-over-year improvement in Industrial free cash flow performance, growth in adjusted earnings, and gains from solid product and service offerings. The company reiterated its projections for 2021.
In the reported quarter, the industrial conglomerate’s adjusted earnings were 3 cents per share, surpassing the Zacks Consensus Estimate of 2 cents. Also, the bottom line increased 50% from the year-ago quarter’s 2 cents per share as lower costs and expenses help offset the decline in revenues.
Revenue Details
In the quarter under review, General Electric’s consolidated revenues were $17,118 million, reflecting a year-over-year decline of 12.2%. Poor sales performance in Industrial affected the quarterly results, partially offset by improvements in GE Capital.
Also, the company’s top line lagged the Zacks Consensus Estimate of $17,576 million.
On a segmental basis, its Industrial revenues decreased 13.3% year over year to $16,329 million. Also, GE Capital’s revenues totaled $878 million, increasing 4.9% year over year.
For the Industrial segment, organic revenues in the quarter decreased 10% from the year-ago quarter to $16,023 million. Industrial orders declined 13% year over year to $17 billion. Organically, orders were down 8%. Backlog at the end of the first quarter was $383.4 billion, down 4% from the year-ago quarter.
The performance of the Industrial segment’s components business is discussed below:
Aviation revenues decreased 27.6% year over year to $4,992 million and orders fell 26%. Organically, revenues and orders were down 28% and 26%, respectively.
Healthcare revenues in the reported quarter totaled $4,308 million, decreasing 8.9% year over year. The segment’s orders dipped 15%. On an organic basis, revenues increased 7% and orders grew 5%.
Renewable Energy revenues totaled $3,248 million, up 1.7% year over year. Its orders increased 15% in the reported quarter. Organically, the segment’s sales were flat year over year, while orders were up 13%.
The Power segment’s revenues decreased 2.6% year over year to $3,921 million. Organically, sales decreased 4% from the year-ago quarter. The segment’s orders decreased 12% year over year. Gas Power revenues decreased 1% to $2,829 million and that for the Power Portfolio was down 6% to $1,091 million.
Margin Profile
In the quarter under review, General Electric’s cost of sales was down 13.1% year over year to $12,538 million. It represented 73.2% of the quarter’s revenues versus 74% in the year-ago quarter. Selling, general and administrative expenses in the quarter decreased 5.6% to $2,891 million. It was 16.9% of the quarter’s revenues versus 15.7% in the year-ago quarter. Research and development expenses totaled $561 million, reflecting a year-over-year decline of 22.4%. It represented 3.3% of the quarter’s revenues versus 3.7% in the year-ago quarter.
The Industrial segment’s adjusted operating profit was $828 million, down 19.8% year over year. Margin in the quarter was 5.1% versus 5.5% in the first quarter of 2020.
On a reported basis, the Power segment recorded an operating loss of $87 million, reflecting an improvement from a loss of $131 million in the year-ago quarter. Renewable Energy recorded a loss of $234 million compared with a loss of $327 million in first-quarter 2020. The Aviation segment’s earnings were $641 million, down 36% year over year. The Healthcare segment’s profits declined 19% to $698 million.
The GE Capital segment witnessed a loss of $172 million compared with a loss of $187 million in the year-ago quarter.
Interest and other financial charges decreased 10.9% to $500 million.
Balance Sheet and Cash Flow
Exiting the first quarter of 2021, General Electric had cash and cash equivalents of $31.8 billion, down 13.1% from $36.6 billion recorded at the end of the previous quarter. Borrowings were $66.9 billion, down 4.8% from $70.3 billion at the end of the fourth quarter.
Non-GAAP free cash flow for GE Industrial totaled ($845) million in the first quarter versus ($2,207) million in the year-ago quarter.
Restructuring
In June 2018, General Electric communicated plans to transform into a high-tech industrial company, focused on Aviation, Power and Renewable Energy.
In sync with its plans, the company completed the sale of its transportation business to Westinghouse Air Brake Technologies Corporation in first-quarter 2019. Further, General Electric completed the divestment of the BioPharma business to Danaher Corporation in March 2020. Furthermore, General Electric lost its controlling shareholding in Baker Hughes Company. In addition, the company started a program in the third quarter of 2020 to fully dispose of its remaining stake in Baker Hughes. The actions will be valid in the coming three years.
Efforts are on track to reduce the exposure to the GE Capital business. Asset disposition totaled $6 billion in the first quarter of 2021.
Outlook
For 2021, the company anticipates Industrial’s organic revenue growth in low-single digits, while its adjusted organic margin is predicted to expand 250 basis points. Industrial free cash flow will likely be $2.5-$4.5 billion.
Adjusted earnings per share for the year are anticipated to be 15-25 cents.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 23.08% due to these changes.
VGM Scores
At this time, GE has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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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Why Is GE (GE) Up 1.5% Since Last Earnings Report?
A month has gone by since the last earnings report for General Electric (GE - Free Report) . Shares have added about 1.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is GE due for a pullback? 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 catalysts.
General Electric Q1 Earnings Top Estimates, Revenues Lag
General Electric has reported mixed results for first-quarter 2021. Its earnings surpassed estimates by 50%, while the sales lagged the same by 2.6%.
Results reflected a year-over-year improvement in Industrial free cash flow performance, growth in adjusted earnings, and gains from solid product and service offerings. The company reiterated its projections for 2021.
In the reported quarter, the industrial conglomerate’s adjusted earnings were 3 cents per share, surpassing the Zacks Consensus Estimate of 2 cents. Also, the bottom line increased 50% from the year-ago quarter’s 2 cents per share as lower costs and expenses help offset the decline in revenues.
Revenue Details
In the quarter under review, General Electric’s consolidated revenues were $17,118 million, reflecting a year-over-year decline of 12.2%. Poor sales performance in Industrial affected the quarterly results, partially offset by improvements in GE Capital.
Also, the company’s top line lagged the Zacks Consensus Estimate of $17,576 million.
On a segmental basis, its Industrial revenues decreased 13.3% year over year to $16,329 million. Also, GE Capital’s revenues totaled $878 million, increasing 4.9% year over year.
For the Industrial segment, organic revenues in the quarter decreased 10% from the year-ago quarter to $16,023 million. Industrial orders declined 13% year over year to $17 billion. Organically, orders were down 8%. Backlog at the end of the first quarter was $383.4 billion, down 4% from the year-ago quarter.
The performance of the Industrial segment’s components business is discussed below:
Aviation revenues decreased 27.6% year over year to $4,992 million and orders fell 26%. Organically, revenues and orders were down 28% and 26%, respectively.
Healthcare revenues in the reported quarter totaled $4,308 million, decreasing 8.9% year over year. The segment’s orders dipped 15%. On an organic basis, revenues increased 7% and orders grew 5%.
Renewable Energy revenues totaled $3,248 million, up 1.7% year over year. Its orders increased 15% in the reported quarter. Organically, the segment’s sales were flat year over year, while orders were up 13%.
The Power segment’s revenues decreased 2.6% year over year to $3,921 million. Organically, sales decreased 4% from the year-ago quarter. The segment’s orders decreased 12% year over year. Gas Power revenues decreased 1% to $2,829 million and that for the Power Portfolio was down 6% to $1,091 million.
Margin Profile
In the quarter under review, General Electric’s cost of sales was down 13.1% year over year to $12,538 million. It represented 73.2% of the quarter’s revenues versus 74% in the year-ago quarter. Selling, general and administrative expenses in the quarter decreased 5.6% to $2,891 million. It was 16.9% of the quarter’s revenues versus 15.7% in the year-ago quarter. Research and development expenses totaled $561 million, reflecting a year-over-year decline of 22.4%. It represented 3.3% of the quarter’s revenues versus 3.7% in the year-ago quarter.
The Industrial segment’s adjusted operating profit was $828 million, down 19.8% year over year. Margin in the quarter was 5.1% versus 5.5% in the first quarter of 2020.
On a reported basis, the Power segment recorded an operating loss of $87 million, reflecting an improvement from a loss of $131 million in the year-ago quarter. Renewable Energy recorded a loss of $234 million compared with a loss of $327 million in first-quarter 2020. The Aviation segment’s earnings were $641 million, down 36% year over year. The Healthcare segment’s profits declined 19% to $698 million.
The GE Capital segment witnessed a loss of $172 million compared with a loss of $187 million in the year-ago quarter.
Interest and other financial charges decreased 10.9% to $500 million.
Balance Sheet and Cash Flow
Exiting the first quarter of 2021, General Electric had cash and cash equivalents of $31.8 billion, down 13.1% from $36.6 billion recorded at the end of the previous quarter. Borrowings were $66.9 billion, down 4.8% from $70.3 billion at the end of the fourth quarter.
Non-GAAP free cash flow for GE Industrial totaled ($845) million in the first quarter versus ($2,207) million in the year-ago quarter.
Restructuring
In June 2018, General Electric communicated plans to transform into a high-tech industrial company, focused on Aviation, Power and Renewable Energy.
In sync with its plans, the company completed the sale of its transportation business to Westinghouse Air Brake Technologies Corporation in first-quarter 2019. Further, General Electric completed the divestment of the BioPharma business to Danaher Corporation in March 2020. Furthermore, General Electric lost its controlling shareholding in Baker Hughes Company. In addition, the company started a program in the third quarter of 2020 to fully dispose of its remaining stake in Baker Hughes. The actions will be valid in the coming three years.
Efforts are on track to reduce the exposure to the GE Capital business. Asset disposition totaled $6 billion in the first quarter of 2021.
Outlook
For 2021, the company anticipates Industrial’s organic revenue growth in low-single digits, while its adjusted organic margin is predicted to expand 250 basis points. Industrial free cash flow will likely be $2.5-$4.5 billion.
Adjusted earnings per share for the year are anticipated to be 15-25 cents.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 23.08% due to these changes.
VGM Scores
At this time, GE has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, GE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.