‘s turnaround and transformation continued with its fourth-quarter earnings report and 2023 guidance.
Tuesday morning, GE (ticker: GE) announced adjusted earnings of $1.24 a share from sales of $21 billion.
Earnings and cash flow during the period looked solid. Wall Street was looking for earnings per share of $1.15 from sales of about $21.3 billion. A year ago, GE reported earnings per share of 72 cents from $20.3 billion in sales.
Fourth-quarter free cash flow came in at $4.3 billion, raising full-year free cash flow to $4.8 billion.
Guidance for the new year might disappoint, but expectations for cash flow had shares rising in early trading.
Initial guidance for 2023 calls for earnings per share between $1.60 and $2 on sales of $60 billion. Free cash flow is expected to come in between $3.4 billion and $4.2 billion. The outlook excludes GE HealthCare Technologies (GEHC), which was spun out of GE on Jan. 3.
Tracking 2023 earnings estimates has been difficult for investors because not all analysts have updated the number for the healthcare business’s spin out. The sales figure looks like it is inline with Wall Street estimates. The earnings figure looks a little light. At the midpoint of guidance, GE shares are trading at about 44 times earnings. Shares look less expensive based on free cash flow. The midpoint of $3.8 billion works out to roughly $3.50 per share.
The free cash flow range of $3.4 billion to $4.2 billion “brackets consensus,” wrote RBC analyst Deane Dray in a Tuesday. He rates GE stock Buy, with a $93 price target.
“2022 marked the beginning of a new era for GE. We successfully launched
delivered strong financial performance, made significant operational progress, and continued our steadfast commitment to our customers,” said CEO Larry Culp in a news release. “Looking ahead, GE is positioned to drive growth, profit, and cash, and our outlook reflects our confidence in our businesses.”
GE has paid down more than $100 billion in debt since 2018. The group’s power business, called GE Vernova, is slated to be spun out to investors at the start of 2024.
Vernova, made up of GE’s renewables and power generation arm, lost about $1 billion in 2022. The group expects the business to lose about $400 million in 2023.
The renewables portion of Vernova has been hampered by an uncertain regulatory framework and rising raw material costs. Inflation problems remained, but the recently passed Inflation Reduction Act included tax credits for renewable power generation, which should help demand.
The “act is a real game changer for us and the industry going forward,” Culp said on GE’s earnings conference call. “In fact, we began to see a [return] in demand this quarter, with renewables orders up 7%.”
For the full year, new orders in the power and aerospace businesses exceeded sales.
GE’s aviation business generated about $4.8 billion in operating profit in 2022. The company expects the 2023 figure to come in at about $5.5 billion.
GE stock fell 1.5% in premarket trading shortly after results were released. Shares have since rallied some and are now up about 0.2% at $79.90 a share. The S&P 500 is flat. The Dow Jones Industrial Average is down about 0.2%.
GE stock is up about 22% so far this year, although the spinoff of GE HealthCare obscures the performance a bit. Including the value of the healthcare stock, up about 18%, an investor’s GE holdings have risen about 20% so far in 2023.
The S&P 500 is up about 5% so far this year, while the Dow Jones Industrial Average has gained a little more than 1%.
GE HealthCare is due to report its fourth-quarter numbers on Jan. 30.
Write to Al Root at [email protected]