GE Earnings Are Coming. The Stock Could Get Moving Again.
stock has been stuck for the past three months, since reporting first-quarter earnings. Shareholders hope second-quarter numbers can bring shares out of their recent funk. It will take a “beat and raise” quarter, at minimum, given what’s going on with Covid-19.
GE (ticker: GE) shares are down about 6% since the company’s first-quarter report on April 27. The
S&P 500 index,
for comparison, is up about 5% over the same span.
First-quarter earnings don’t appear to be the problem. GE beat Wall Street projections, turning in earnings 3 cents per share when analysts were looking for EPS of 1 cent. But GE management only maintained full-year earnings and free-cash-flow guidance.
Investors like “beat-and-raise” quarters far better than “beat-and-maintain.”
For the second quarter, analysts project EPS of 3 cents on sales of $18.1 billion. For the full year, analysts expect EPS of 25 cents, and $3.9 billion in free cash flow from GE’s industrial operations. Wall Street is at the high end of management’s guidance. GE has guided to full-year EPS of 15 cents to 25 cents, and $2.5 billion to $4.5 billion in free cash flow.
Apart from GE not raising guidance last quarter, there are other reasons for the stock’s weakness. In fact,
((BA)) stock is also down about 9% since GE reported first-quarter earnings. Boeing stock, of course, is tied to the health of the commercial-aerospace industry. And GE’s largest division is its aerospace unit.
Investors seem to be a little more wary about the industry’s outlook because of the resurgence in Covid-19 cases, even as commercial-aerospace traffic recovers.
During the second quarter, commercial air travel in the U.S. was down about 33% compared with 2019 pre-pandemic levels. That was an improvement from the down-55% comparison between the first quarter of 2021 and the first quarter of 2019.
That’s a big sequential improvement. More than 148 million people boarded planes in the second quarter, up from about 86 million in the first quarter. Still, the seven-day average of new Covid cases in the U.S. hit about 51,000 this past Sunday, up more than 150% from the seven-day average two weeks prior.
Rising Covid cases might be beyond the control of Boeing or GE, but GE can adjust spending and debt repayment. So investors will want to see free-cash-flow guidance moving higher to build confidence that progress is still being made regarding the company’s multiyear turnaround being led by CEO Larry Culp.
Progress on the turn around can been seen in per share earnings. GE earned $1.43 a share back in 2016. That fell to 1 cent a share in 2020. Analyst project about EPS of 25 cents in 2021, and more than doubling to 52 cents in 2022.
Management hosts a conference call for investors and analysts at 8 a.m. eastern time, after releasing earnings, to discuss results.
Write to Al Root at [email protected]