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Will GE's Q2 Earnings Gain From Aviation, Renewable Energy?

Zacks Equity Research

General Electric Company GE is scheduled to report second-quarter 2019 results on Jul 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 31.2% of Industrial revenues in the first quarter of 2019. Alternatively, the Renewable Energy segment — comprising wind and hydropower businesses — accounted for roughly 6.3% of Industrial revenues in the first quarter.

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

Factors to Influence Segments, Estimates

Over the past few quarters, the Aviation segment has supported top-line growth for General Electric. Notably, the segment pulled off a positive average revenue surprise of 2.43% in the past four quarters. Rising popularity of LEAP engines boosted the segment’s sales in the last reported quarter, with orders rising 7%. Operating profits were up 4%.  

General Electric believes that strengthening services and military businesses will benefit the Aviation segment in 2019. Shipments of LEAP engines are believed to be in excess of 1,800 in 2019. It predicts the segment’s organic sales to increase in a high-single digit. Margin in the year is predicted to be roughly 20%.

For the second quarter of 2019, the Zacks Consensus Estimate for Aviation’s revenues is pegged at $8,171 million, roughly 2.7% above the previous quarter’s reported figure and above 8.7% from the year-ago quarter’s number.

For Renewable Energy, the company believes that organic revenues will grow in double-digits in 2019. Notably, growth in orders boosted the segment’s organic sales in the last reported quarter.

For the second quarter of 2019, the Zacks Consensus Estimate for Renewable Energy’s revenues is pegged at $2,642 million, suggesting growth of 64.7% from the previous quarter’s reported figure and above 59.8% from the year-ago quarter’s number. On the flip side, the segment pulled off average negative earnings surprise of 11.33% in the last four quarters.

Overall Q2 Expectations

The Zacks Consensus Estimate for the Industrial segment’s revenues in the to-be-reported quarter is currently pegged at $27,179 million, indicating growth of 6.5% from the previous quarter’s reported number and a 5.2% decline from the year-ago quarter’s figure. Profits for the Industrial segment are likely to be $2,600 million, up 3.1% from the previous quarter’s reported figure and down 17.6% from the year-ago quarter’s number. (Read more: General Electric to Post Q2 Earnings: What to Expect?)

Moving Ahead

In June 2018, General Electric announced plans about restructuring the business portfolio to become a high-tech industrial company focused on Aviation, Power and Renewable Energy. The company has taken various steps to comply with this reorganization plan.

Zacks Rank & Other Upcoming Releases

This company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other stocks in the industry, which are likely to report their results soon, are Macquarie Infrastructure Company MIC — to report results on Jul 31; Griffon Corporation GFF — to post results on Aug 7; and HC2 Holdings, Inc. HCHC — to report results on Aug 14.

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