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GE to Post Q4 Earnings: Will Aviation & Renewable Energy Aid?

Zacks Equity Research

General Electric Company GE is scheduled to report fourth-quarter 2018 results on Jan 31, 2019, before the market opens.

The GE Aviation segment manufactures commercial and military jet engines, and components as well as provides aftermarket services. It accounted for roughly 26.9% of Industrial revenues in the third quarter. Alternatively, Renewable Energy segment — comprising wind and hydropower businesses — accounted for roughly 10.3% of Industrial revenues in the third quarter.

Apart from Power and Renewable Energy segments, the Industrial segment results include that of five other segments.

Q3 Segmental Performance, Estimates for Q4

In the third quarter of 2018, Aviation segment performed well, with revenues increasing 11.7% year over year. Orders increased 10.3% over the year-ago quarter, with equipment orders expanding 86.4% and services orders growing 13.3%. It is worth mentioning here that shipments of LEAP engines surged 192% over the year-ago quarter.

Markedly, the segment has pulled off a positive average surprise of 0.52% in the past four quarters. This average includes the impact of negative 1.99% sales surprise for the third quarter.

General Electric anticipates rising passenger air travel globally to continue benefiting the Aviation segment. Also, rise in air freight volumes and strengthening shipments of LEAP engines will be beneficial. For the fourth quarter of 2018, the Zacks Consensus Estimate for Aviation’s revenues is pegged at $7,963 million, roughly 10.3% above $7,222 million generated in the year-ago quarter.

Renewable Energy segment’s revenues increased 14.6% in the third quarter of 2018. However, orders were down 3.3% while backlog gained 16.4%. Improvement in shipments and project build will be beneficial.

For the fourth quarter of 2018, the Zacks Consensus Estimate for Renewable Energy revenues is pegged at $3,387 million, above $2,875 million recorded in the year-ago quarter. On the flip side, the segment pulled off average negative earnings surprise of 9.25% in the last four quarters. In the last quarter, the segment lagged the Zacks Consensus Estimate by 9.71%.

Overall Q4 Expectations

The Zacks Consensus Estimate for revenues of the Industrial segment for 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. (Read more: General Electric to Post Q4 Earnings: What’s in Store?)

Moving Ahead

In June 2018, General Electric announced plans about restructuring the business portfolio in a bid to become a high-tech industrial company focused on Aviation, Power and Renewable Energy.

The restructuring move might bring in some relief for the company. General Electric currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other stocks in the industry, which are likely to soon report their October-December quarter results soon, are Honeywell International Inc. HON, Carlisle Companies Incorporated CSL and Griffon Corporation GFF. While Honeywell International will report numbers on Feb 1, Carlisle Companies will post results on Feb 7 and Griffon on Jan 30.

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