General Electric
just might report one of its most consequential earnings reports in its more than 130 years as an American industrial titan.
The numbers it puts out Tuesday could be the last that investors hear from a consolidated company.
GE
is breaking apart.
GE Healthcare Technologies
was spun out in early 2023. GE Vernova, the company’s power generation-related businesses, is slated to be spun out in early in the second quarter—in April. That will leave GE Aerospace, the last remaining piece of GE.
Depending on how soon in April, there won’t be another GE-only earnings report. GE Aerospace and GE Vernova, as well as GE Healthcare, will all report separately.
Because of all the changes, and the tricky timing, 2024 guidance—probably coming Tuesday morning along with fourth-quarter figures—will be more difficult to communicate and understand. Investors will have to be ready to do some math.
GE could offer up any number of different outlooks. Management, for example, could give first-quarter guidance for the consolidated company or both GE Vernova and GE Aerospace. Or it could give full-year guidance for both companies—or anything else in between.
Another very real possibility: Management might simply tell investors to wait for guidance until early March, when GE Aerospace and GE Vernova host investor days ahead of the spinoff and launch.
More than likely, though, GE officials will offer some kind of forecast. But it will probably take a little more effort to fully grasp.
Today, Wall Street models the company as it is right now, with the aerospace and energy divisions together. Analysts project 2024 earnings per share of about $4.59 and free cash flow of $6.3 billion from $70 billion in sales.
For the fourth quarter, expectations are for EPS of about 90 cents and sales of $17.2 billion. A year ago, GE reported EPS of $1.24 and sales of $21 billion. That quarter still reflected results from
GE Healthcare Technologies,
which was spun out at the start of 2023.
For the full year, GE is expected to report 2023 EPS of $2.67. At the start of 2023, management expected to generate EPS of about $1.80. Their guidance had climbed to $2.60 by October.
Jefferies analyst Sheila Kahyaoglu expects a ”beat and raise” type quarter. For the aerospace division, she expects another year of profit margin expansion with operating profit coming in at about $7 billion, up $1 billion year over year. For Vernova, operating profit guidance could be set at “$1 billion with potential to accelerate based on the turnaround,” added the analyst in a preview report.
Vernova profits have been held back by a money-losing wind power division that GE has been working to turn around for years. No wind turbine maker earns good money. Inflation, long lead times, and changing regulations have made it difficult for all companies
Kahyaoglu rates GE shares Buy and has a $150 price target. Overall, 63% of analysts covering GE have a Buy rating. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is $144 a share.
Through midday trading Monday, GE shares were up 64% over the past 12 months. The
S&P 500
and
Nasdaq Composite
were up 21% and 36%, respectively.
Write to Al Root at [email protected]
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