GE shares slide 5% despite strong bottom line performance
2min read General Electric (GE) reported Q3 earnings of $1.15 per share, beating the consensus estimate of $1.13, while revenue came in at $8.94 billion, missing expectations of $9.02 billion. The company saw a year-over-year revenue increase of 5.8%, driven by growth in both services and equipment sales. GE also raised its full-year 2024 guidance, now expecting adjusted EPS between $4.20 and $4.35, up from its previous range of $3.95 to $4.20, with revenues projected to grow in the high single digits.
Orders during the quarter grew impressively by 29% to $9.8 billion, with services and equipment both up more than 20%. GE also reported an 8% increase in revenue to $7 billion for services, with spare parts sales and shop visit workscopes contributing to the growth. Equipment revenue grew by 5%, as customer mix and price offset a lower number of units sold. The company’s operating profit increased by 16%, and profit margins expanded by 180 basis points due to higher services volumes and improved pricing.
GE also provided updates on its aerospace business, noting that it will ramp up deliveries of the GE9X engine for Boeing’s 777X aircraft next year, albeit at a slower rate than initially expected. The company also highlighted that more engines for Boeing's 777X will be delivered in the remaining two months of Q4. Despite ongoing production issues at Boeing, the company’s aerospace unit continued to perform well, buoyed by strong aftermarket sales, which tend to deliver better margins than sales of new engines.
The company’s cash flow performance was another highlight, with adjusted free cash flow reaching $1.81 billion in Q3, up 5.2% year-over-year and well above the $1.27 billion expected by analysts. GE also raised its full-year free cash flow guidance to a range of $5.6 billion to $5.8 billion, up from its prior estimate of $5.3 billion to $5.6 billion. Additionally, GE lifted its adjusted operating profit guidance to $6.7 billion to $6.9 billion for 2024, from a previous range of $6.5 billion to $6.8 billion.
Despite the positive earnings and guidance upgrades, GE's stock fell by 5.3% in early trading, reflecting heightened expectations heading into the report. The stock has rallied nearly 91% year-to-date, adjusted for the April spinoff of GE Vernova, and the market had priced in significant optimism. Investors may have been looking for even stronger performance, given the stock’s meteoric rise in 2024.
GE Aerospace remains a key growth driver, with total orders up 28% to $12.6 billion for the quarter, including a 29% increase in commercial engines and services orders. The company expects commercial engines and services revenue to grow in the low double digits to mid-teens, while defense and propulsion technology revenue is projected to increase in the mid- to high-single digits. Despite Boeing’s labor issues, GE maintained its robust growth in the aerospace sector, driven by strong demand for aftermarket services.
