Shares of General Electric Co. tumbled on Tuesday as a tight first-quarter earnings hit, upbeat free cash flow, and an affirmed full-year outlook weren’t enough to extend its recent earnings streak as revenue fell slightly below forecast. The negative investor reaction could also be the result of relatively high expectations, as stocks have rallied while analyst estimates have declined. And while adjusted profit topped the sell-side analyst consensus, it was below the consensus compiled by Estimize, which also gets buy-side analysts, company executives, and academics.
Also read: GE Earnings: Stocks have rallied while earnings estimates have fallen. Are investors or analysts right this time? GE’s stock fell 3.7% in morning trading, after rising 3.9% in the last four sessions. The stock continued to climb 21.0% year-to-date, outperforming its peers, with the SPDR Industrial Select Sector XLI exchange-traded fund rising 14.9%, and the market as a whole, with the S&P index. 500 SPX up 11.3%. On a net basis, GE posted a loss of $ 2.87 billion, or 33 cents a share, from a net income of $ 6.16 billion, or 70 cents a share, in the same period a year ago. Excluding discontinued operations, the company breakeven per share. Excluding non-recurring items such as costs related to pensions and restructuring, adjusted earnings per share increased to 3 cents from 2 cents a year ago, beating the FactSet consensus of 1 cent. Meanwhile, the consensus estimate was for EPS of 4 cents. Total revenue decreased 12.2% to $ 17.12 billion, below the FactSet consensus of $ 17.59 billion, to mark the first quarterly revenue loss since the third quarter of 2019. The Estimation consensus was $ 17.93 billion. Among GE’s business segments, aviation remained the biggest problem area as the COVID-19 pandemic wreaked havoc on the industry. The company’s revenue fell 28% to $ 4.99 billion, falling short of FactSet’s consensus of $ 5.28 billion. The decrease was primarily due to a double-digit percentage decline in commercial engines and a 40% drop in commercial services. “Clearly, we need aviation to come back,” Chief Executive Larry Culp said in the post-earnings conference call with analysts. “Still, we continue to believe that aviation recovery is a question of when, not if.” CFO Carolina Dybeck Happe said she believes the recovery in the final aviation markets will begin in the “second half” of this year. Elsewhere, energy revenue fell 3% to $ 3.92 billion, below expectations of $ 4.00 billion, and renewable energy revenue increased 2% to $ 3.23 billion. , but they exceeded the $ 3.26 billion expected. Healthcare was the only segment to beat expectations, as revenue fell 9% to $ 4.31 billion, but exceeded expectations of $ 4.09 billion. Orders improved organically as COVID-19-related pressures continued to decline, and elective procedures returned to pre-pandemic levels, Happe said. “Demand for non-pandemic products was strong as government stimulus fueled strong order growth in China, India and Japan,” Happe said. “Meanwhile, the demand for products related to the pandemic began to normalize.” Industrial Free Cash Flow (FCF) improved to negative $ 845 million from negative $ 2.21 billion a year ago. The average FCF estimate from the two analysts who provided estimates to FactSet was negative $ 1.21 billion, with a range of negative $ 870 million to negative $ 1.55 billion. GE affirmed its 2021 guidance ranges for adjusted EPS from 15 cents to 25 cents and for industrial FCF from $ 2.5 billion to $ 4.5 billion. The FactSet consensus for full year EPS is 23 cents and for FCF it is $ 3.89 billion. Inflation has been a “washout”, supply problems “isolated” When RBC Capital’s Deanne Dray asked him in the call with analysts about the “distress” being felt in the industrial sector towards cost inflation and business disruptions. supply chain, Culp said GE was “clearly seeing some price pressure” on organics, resins and certain metals. “But I think we have also been able to mitigate that in the first quarter to achieve an effective wash,” Culp said, according to a FactSet transcript. He said cost cuts have been sought, as well as price increases where possible. See related: Companies that make things that are used to make things have seen profits driven by big jumps in prices. Is that a bad thing? He said GE has experienced some supply problems, particularly in the healthcare and renewable energy businesses, but said it has been more “isolated” at this point. Don’t worry about pension funds for years, CFO Happe said that the $ 2.5 billion GE spent in 2020 to pre-finance its pension plan will pay dividends for years to come. “[W]We do not anticipate any additional planning requirements for GE’s pension plan in the foreseeable future, ”Happe said on the call. “And by that I mean the end of the decade.” Baker Hughes investment turned into a net income Net interest and investment income went to a profit of $ 439 million in the first quarter from a loss of $ 5.63 billion a year ago. That included a pre-tax unrealized gain of $ 296 million from GE’s investment in Baker Hughes Co. BKR, -1.27%, after an unrealized loss of $ 5.71 billion last year. Additionally, as part of the three-year plan launched in 2020 to fully cash in on its stake in Baker Hughes, GE said it received earnings of $ 700 million in the first quarter of 2021 and expects to receive about $ 1 billion in the second quarter. . GE had said in late January that it owned a 30.1% stake in Baker Hughes, which at the time would have been valued at roughly $ 6.5 billion.