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Stocks: GE declines on revenue miss, 3M climbs on earnings beat, IBM boosted by sales growth

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Yahoo Finance's Julie Hyman and Brian Sozzi review recent earnings reports from General Electric, 3M, and IBM.

Video Transcript

[MUSIC PLAYING]

JULIE HYMAN: About two minutes 'til the opening bell on this Tuesday morning, following a weird Monday session, an unusual, a rare Monday session where we saw stocks fall [CHUCKLE] deeply and then recover by day's end. What could happen today? I don't know, but we're seeing indications of a lower open at the moment. We'll see if it stays that way.

One of the stocks that's lower, that probably, maybe will stay that way is General Electric. [CHUCKLE] That company coming out with revenue that missed estimates, $20.3 billion versus the $21.4 billion that analysts were predicting. And that stock's actually accelerating to the downside as, we watch it this morning. Larry Culp, the CEO, saying in a statement, supply chain challenges, commercial selectivity, and uncertainty surrounding the US wind production tax credit impacted our top line.

Indeed, renewable energy sales, they're down by 6%. The company also giving an outlook for this year, organic revenue growth of the high single digits. What stands out to you here, Mr Sozzi, about these GE numbers?

BRIAN SOZZI: So Julie, I was reading this GE report. And the initial move in the stock was higher, believe it or not. And I think investors just scrolled down to the middle of the press release and locked in on what Larry Culp said about free cash flow for this year, signaling it could hit $6 and 1/2 billion. But really, when you dig into this quarter from GE,

It was really another stinker. The company missed revenue estimates in every single business segment. And then, within the company's outlook, just like you mentioned, Julie, they're looking for earnings this year of $2.80 to $3.50 a share. "TheStreet" was looking for about $4, a little over $4 a share in earnings. So GE coming out here with a below-consensus outlook. Looking under the hood of that outlook, Julie, just a lot of optimism for their business.

[MUSIC PLAYING]

[BELL DINGING]

[APPLAUSE]

JULIE HYMAN: There's the opening bell on this Tuesday and that negative open that we have been watching for, after the big whipsaw yesterday. We were just talking about General Electric here. And you know, I don't-- the thing about GE at this point is GE is more just GE than it used to be, obviously. Right? It used to be the General Electric was this big bellwether, could tell us about what was going on in the broader economy. That is much less true at this point.

And so I don't know that we can extrapolate from GE to the rest of the market. Perhaps, to some of the rest of the Industrial sector. But really, it, as usual or as has become usual, seems to be more GE specific, Soz.

BRIAN SOZZI: Oh, this was another incredibly, just complicated quarter to get your hands around, if you like [INAUDIBLE] or whatever reason. Let's keep in mind, they announced, late last year, they're splitting up into various parts here. And that's a process that will play out through this year and ultimately crescendo with that split off, I believe, early next year.

But look, I take issue with their guidance. I think it is incredibly optimistic, even though it is below consensus, to think aviation sales are going to roar back 20% this year. Health care up, low single digits, given supply chain concerns. It's a tall order. I think it's going to be a tall order for GE to reach that earnings guidance, which raises the next question. How much more in expenses do this company have to cut this year to reach that outlook?

JULIE HYMAN: Let's take a look at markets here, now that we have opened up. And indeed, we have opened up in the red. So that bounce that we saw late yesterday did not last. But we could see another reversal in today's session.

That said, the NASDAQ is not opening up here at the lows the futures seemed to be pointing to when it was down 2%. It's off about 1 and 1/2% right now. The S&P 500, up one 1 and 1/3%. The Dow, off by 1%.

Also want to talk about 3M quickly, as we're talking about the industrials. A lot of them out this morning. 3M earnings, coming out ahead of what analysts have been predicting. Net sales, not much changed and coming out effectively in line to slightly better than estimated. But those net sales are up just 3/10 of 1%. And a lot of the different lines of business actually saw declines, year over year, Sox.

BRIAN SOZZI: Yeah. I think the consumer business for 3M looked pretty solid. But profit margins or operating income, under pressure in all the company's businesses. Also, 3M didn't come out with a full-year outlook. They're saving that for an investor day, in a couple of weeks.

But again, I'm looking forward to talking to 3M CEO Mike Roman in the 11 o'clock hour. We'll talk more about the quarter, the outlook, and the demand for mask sales. You know, mask sales are likely re-accelerating because of where we are in the pandemic.

JULIE HYMAN: Yeah, especially since we have now seen recommendations turn towards those N95, KN95, et cetera, and away from cloth masks. Finally, let's take a look at IBM. IBM, the best sales growth in 10 years for the company. Revenue coming in ahead of estimates. Earnings per share coming in ahead of estimates. And that sales growth, by the way, was 6 and 1/2%.

Effectively, what we've seen, the transition at IBM is a transition towards a more cloud-based business. They actually have a sort of hybrid cloud offering here. It helps clients put their data and stuff in the cloud. But they also offer a service component for that.

And so that seems to be paying off, to some extent, But analysts, Soz, are sort of waiting and seeing if this is going to be a more sustained recovery for IBM. And a lot of them cautioning that comps for the latter part of this year are going to start to get trickier.