General Electric (GE) prepares to report for the first quarter after warning of business uncertainties due to the Russia-Ukraine war. GE stock edged higher as the market tried to bounce back after tumbling into a correction.
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In March, GE reaffirmed 2022 financial guidance, but CEO Larry Culp said that Russia’s Feb. 24 invasion of Ukraine has created “too many uncertainties.”
Along with GE earnings, investors may look for updates on GE’s outlook as well as its three-way split.
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General Electric Earnings
Estimates: Analysts on Wall Street expect GE earnings to tumble 24% to 18 cents per share on a 2% sales drop to $16.851 billion. They forecast a cash burn of $816.5 million in a seasonally weak first quarter, after three quarters of positive cash generation.
Free cash flow, or FCF, is a closely watched measure of the health of GE’s operations. It rebounded strongly in 2021 after crumbling by two-thirds in 2020.
Outlook: In all of 2022, Wall Street expects GE earnings of $3.23 a share, just above the midpoint of company guidance and rising 89% year over year. In March, General Electric also guided FCF of $5.5 billion-$6.5 billion for the full year.
Results: Check back early Tuesday.
GE Stock
Shares of General Electric rose 0.9% to 89.88 on the stock market today after falling as low as 86.58 intraday. Shares are below their 50-day moving average, where they’ve hit resistance in the past two months. Shares of GE failed a brief November breakout past 115.42, which followed the three-way breakup news. There’s no new buy point so far as some investors worry about a deal purgatory for GE stock.
The relative strength line for GE stock is lagging again, and its 50-day average has fallen below the 200-day line.
Key aviation rival Raytheon Technologies (RTX) nearly flashed an automatic sell signal Monday ahead of a big earnings week for defense stocks while military spending hit a milestone. RTX fell as low as 97.58, down 6.6% from a buy point but not quite at the 7%-8% automatic sell figure. Raytheon closed off 0.9% to 99.61, but back above its 50-day line.
GE Split, Restructuring
In 2024, GE will emerge as an aviation-focused company after a three-way breakup. The American industrial icon plans to spin off its lower-growth health and energy businesses to focus on aviation.
GE’s restructuring reflected years of dwindling profits.
Amid crosswinds, GE and Raytheon are pivoting to aviation, leaving their storied conglomerate pasts behind. Both make jet engines and other parts.
The Russia-Ukraine war means higher defense spending and missile demand. But it has further disrupted global supply chains that are already strained by the pandemic.
Russia is a key supplier of titanium, which is used widely in the aerospace industry. Both Russia and Ukraine are key producers of oil and gas and industrial metals such as iron, aluminum and steel.
A jump in energy and metals prices following the war has aggravated inflationary pressures. Meanwhile, widening Covid-19 lockdowns in China are hurting supply chains afresh.
In commercial aviation, Boeing 787 Dreamliner deliveries remain halted for now. Reuters reported April 7 that Boeing told key airlines and parts suppliers that Dreamliner deliveries would resume in the second half of 2022.
Both GE and Raytheon supply the critical 787 jet. Raytheon reports early Tuesday. Boeing (BA) reports early Wednesday;
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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Source: https://www.investors.com/news/ge-stock-general-electric-earnings-q1-ceo-ukraine-warning/?src=A00220&yptr=yahoo