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"Outstanding" General Electric Aviation Business Drives Surprise Revenue Increase, GE Equity Soars

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GE shares soared on Tuesday General Electric (GE), driven by jet engine units, crushed its second quarter earnings forecast. Wall Street created its business as a “outstanding” result, as the industrial conglomerate appears to emerge as an aviation-focused company in 2024.


General Electric confirms full-year EPS guidance and cuts 2022 net cash flow (FCF) outlook by $ 1 billion due to working capital pressure, despite significant second-quarter earnings growth I did.

“Lean and decentralized (strategy) are improving delivery times, prices and cost performance,” GE CEO Larry Calpe said in a statement on July 26. “Despite this development, there is still a lot of uncertainty about the external pressure companies are currently facing.”


Surprisingly high GE revenue in the second quarter

In the second quarter, General Electric’s earnings almost doubled to 78 cents per share. Revenues recovered nearly 6% to $ 17,880 million. Analysts expected EPS to fall 6.5% year-on-year to 37 cents and revenue of $ 17,457 million.

Free cash flow is $ 162 million, contrary to the view of over $ 800 million in cash burn. Orders increased by 4%, with overall service and equipment growth. The margin has increased by 380 basis points.

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In GE’s industrial sector, second-quarter revenue increased 27% in aviation and 1% in healthcare. Electricity has decreased by 2% and renewable energy has decreased by 23%. The renewable energy sector was the only business segment to record a loss in the second quarter.

“Aerospace was a key driver of this quarter’s performance as the industry’s recovery is gaining momentum,” CEO Calpe said in a news release. In the second quarter, aviation orders increased 26% year-on-year. The commercial and military jet engine business grew with a 47% increase in service demand, benefiting from increased store visits and sales of spare parts. However, shipments of commercial engines declined and supply disruptions hurt deliveries.

On Tuesday, GE reaffirmed the tax-exempt spin-off of its early 2023 healthcare and early 2024 electricity businesses, after which it will emerge as an aviation-centric company.

GE maintains outlook

General Electric has repeatedly continued its trend towards the lower end of the 2022 outlook. This includes late single-digit revenue growth (20% for aviation) and adjusted EPS of $ 2.80 to $ 3.50 guidance. However, GE reduced the scope of FCF guidance and predicted that supply chain challenges and pressure on working capital would push $ 1 billion in that flow after 2022.

Dean Dray, an analyst at RBC Capital Markets, said in a note on Tuesday that the 2022 EPS guidance suggests that the second half of the year will be even weaker than expected after a strong second quarter. “But we believe that the right amount of conservatism has been burned,” he added.

Aviation was “outstanding” among the broad top-line strengths of the second quarter, Dray said. He added that free cash flow is another “bright spot” and that it expects a billion-dollar FCF pushout to eventually be recovered.

Analysts rate GE shares as outperforming with a price target of $ 94.

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GE stock regains key level

In stock market trading on Tuesday, stock prices rose 6.5% to 72.79. For the first time since April, General Electric has surpassed the 50-day moving average and is ready to extend its winning streak to eight sessions. GE’s share price hit a 20-month low in early July.

The line of relative strength of GE stocks has begun to rise after a slump. A rise in the RS line means that stock prices are outperforming compared to the S & P 500.

GE Aviation holds the key

favorite Raytheon Technologies (RTX), General Electric will leave its renowned conglomerate and focus on the faster growing aviation business. GE plans to complete a major dissolution in early 2024.

With Raytheon 3M (MMM) also reported at the beginning of Tuesday. Raytheon’s share price fell 3.1% on Tuesday after missing a second quarter earnings. 3M shares surged 5.2% after the second quarter beat. Among other peers Roper Technologies (ROP) was down 0.7%, surpassing the July 22nd Q2 earnings view.

Both GE and Raytheon make jet engines for embarrassing plane makers Boeing (BA) landed many new jet orders at the Farnborough Airshow last week. Boeing will report early Wednesday.

On July 18, GE confirmed that the historic split was on track, with three public enterprises scheduled to emerge in 2023-24: GE Aviation, GE HealthCare, and GE Vernova (electricity and renewable energy). Nominated to run a business). General Electric announced its first major dissolution last fall after years of costly restructuring efforts. Investors also fell in love with the conglomerate business model.

Also on July 18, the industrial giant announced: Delta Air Lines (DAL) and Qatar Airways have selected the Leap-1B engine to power the Boeing 737-10 fleet.

So far, GE’s inventory has fallen by 23%. Raytheon is up 6.4%.

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