General Electric (GE) Beats on Q3 Earnings, Raises 2023 EPS View
General Electric Company GE reported third-quarter 2023 adjusted earnings of 82 cents per share, which beat the Zacks Consensus Estimate of adjusted earnings of 56 cents per share. The bottom line increased 134.3% year over year.
Total revenues of $17,346 million beat the consensus estimate of $15,675 million. The top line increased 19.9% year over year.
Segmental Discussion
GE started reporting its revenues under two segments, effective from the first quarter of 2023, namely GE Aerospace and GE Vernova. The company completed the spin-off of GE HealthCare into an independent publicly traded company, retaining an approximately 19.9% stake in GE HealthCare’s common stock.
Aerospace revenues jumped 25% year over year to $8,409 million in the reported quarter, driven by robust demand for commercial engines and services, spare parts and Defense. The Zacks Consensus Estimate for the quarter was $7,896 million. Organic revenues rose 25% year over year. Orders grew 34% year over year.
The GE Vernova has two subsegments, namely Renewable Energy and Power.
The Renewable Energy segment’s revenues totaled $4,151 million, up 15% year over year. The consensus estimate for the quarter was $3,676 million. Organically, the same increased 14%. Results benefited from equipment growth at the grid, onshore wind in North America and offshore wind. Orders increased 5% year over year on a reported basis.
The Power segment’s revenues were up 13% year over year to $3,974 million. The consensus estimate for the quarter was $3,664 million. Organic revenues increased 9%. Solid momentum in heavy-duty gas turbines and aero-derivative equipment aided its performance. Orders grew 2% on a reported basis year over year.
General Electric Company Price, Consensus and EPS Surprise
General Electric Company price-consensus-eps-surprise-chart | General Electric Company Quote
Margin Profile
In the quarter under review, General Electric’s cost of sales increased 11.9% year over year to $12,362 million. Selling, general and administrative expenses increased 10.4% year over year to $2,171 million. Research and development expenses totaled $471 million, reflecting an increase of 10.6% year over year.
General Electric’s adjusted profit was $1,615 million, up 349.9% year over year. The margin in the quarter was 9.8%, up 720 basis points. On a reported basis, the Aerospace segment reported a profit of $1,712 million, up 33% year over year. The Renewable Energy sub-segment (Part of GE Vernova) incurred a loss of $317 million compared with a loss of $934 million in the year-ago quarter. The Power sub-segment (part of GE Vernova) reported a profit of $238 million, up 69% year over year.
Balance Sheet and Cash Flow
Exiting the third quarter, General Electric had cash, cash equivalents and restricted cash of $13,127 million compared with $15,810 million at the end of December 2022. The company’s long-term borrowings were $19,488 million at the end of the third quarter compared with $20,320 million at the end of December 2022.
Adjusted free cash inflow in the first nine months was $2,189 million against the free cash outflow of $279 million in the year-ago period.
In the first nine months of 2023, GE rewarded its shareholders with a dividend payment of $501 million, up 10.1% year over year. General Electric repurchased about 2.2 million shares for $0.3 billion during the third quarter.
Outlook
GE has increased its 2023 earnings per share guidance. Adjusted earnings are predicted in the band of $2.55-$2.65 per share compared with adjusted earnings of $2.10-$2.30 per share expected earlier. The Zacks Consensus Estimate for the same is $2.32 per share. General Electric expects low-teens-digit revenue growth in 2023 compared with the low-double-digit growth predicted earlier. GE expects a free cash flow of approximately $4.7-$5.1 billion for the ongoing year compared with $4.1-$4.6 billion expected earlier.
For 2023, General Electric expects low 20% organic revenue growth for the Aerospace segment and high-single-digit organic revenue growth for the Vernova segment.
Zacks Rank & Other Stocks to Consider
GE currently carries Zacks Rank #2 (Buy). Some other top-ranked companies are discussed below:
Applied Industrial Technologies, Inc. AIT presently sports a Zacks Rank #1 (Strong Buy) and has a trailing four-quarter earnings surprise of 15%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 1.8% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 32.5% in the past year.
Axon Enterprise, Inc. AXON currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of 60.2%, on average.
In the past 60 days, estimates for Axon’s earnings have increased 0.3% for 2023. The stock has soared 53.2% in the past year.
Caterpillar Inc. CAT presently carries a Zacks Rank of 2. CAT’s earnings surprise in the last four quarters was 18.5%, on average.
In the past 60 days, estimates for Caterpillar’s 2023 earnings have increased 0.7%. The stock has gained 26.9% in the past year.
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