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GE surpasses top and bottom line expectations, provides cautious outlook; Investors buy the dip

AInvestTuesday, Jan 23, 2024 9:21 am ET
2min read

General Electric Company (GE) delivered strong financial results in its Q4 earnings report, surpassing Street estimates. The conglomerate reported revenue, segment EBIT, EPS, and free cash flow (FCF) that all exceeded expectations. However, GE Aerospace's revenue and EBIT fell slightly below projections. Overall, the Q4 results were a positive end to the year for GE.

GE's Q4 revenue stood at $19.42 billion, beating the estimated $17.42 billion. The company's adjusted earnings per share (EPS) were reported at $1.03, surpassing the estimated $0.90. GE experienced a strong 9% beat in segment EBIT, driven largely by a strong performance in its Power segment. It delivered adjusted free cash flow of $2.96B in Q4, higher than the estimated $2.87B.

GE's total orders for the quarter reached $21.7 billion, representing an 8% increase. Organic orders grew by 7%. GE Aerospace showcased solid performance, reporting a 12% year-over-year revenue increase, equivalent to $8.52 billion.

Looking ahead, GE provided its outlook for the first quarter of 2024. The company expects adjusted EPS in the range of $0.60 to $0.65, falling below the analyst consensus of $0.72. GE's Q1 guidance may be a notable focus during the earnings call as it fell short of expectations. However, it is important to note that GE historically guides conservatively, which has led to significant beats in the past.

GE anticipates continued growth in the upcoming year. It projects high single-digit revenue growth for Q1 2024. GE plans to achieve a mid-single-digit adjusted EBITDA margin, towards the higher end of the range. 

GE Aerospace and GE Vernova will operate as independent public companies starting in early April 2024.  For the full year, GE's 2024 guidance reflects the independent operation of GE Vernova and GE Aerospace, incorporating standalone and other costs. GE Vernova is expected to deliver revenue between $34 billion and $35 billion, an adjusted EBITDA margin in the mid-single digits, and free cash flow of $0.7 billion to $1.1 billion. GE Aerospace forecasts adjusted revenue to grow low double digits or more, operating profit of $6.0 billion to $6.5 billion, and free cash flow of greater than $5 billion.

GE Vernova and GE Aerospace will hold their respective Investor Days in New York, NY, on March 6 and March 7, 2024, where they will provide further details on their outlooks.

According to GE Chairman and CEO H. Lawrence Culp, Jr., the outlook for 2024 is highly promising for both GE Vernova and GE Aerospace. These entities are set to operate independently, providing sharper focus on their respective industries. GE Vernova and GE Aerospace aim to build on GE's strong customer relations and service franchises as they continue to innovate and improve.

Deutsche Bank noted that the total Free Cash Flow (FCF) guidance for 2024, at $5.7-$6.1B, is lower than the Street's $6.5B forecast, reflecting a conservative outlook on Aerospace. The overall impression from their analysis is that it was a softer beat, and the guidance provided was less clear-cut than bullish investors had hoped for. Goldman"s analysts, on the other hand, recommended buying GE stock on a dip following the strong results.

The technical chart for General Electric Company (GE) suggests a bullish trend, characterized by the stock's price trading above the 20-day, 50-day, and 200-day moving averages, which aligns with a general upward price trajectory. The predominance of green candlesticks, which denote days when the closing price was higher than the opening, and a Relative Strength Index (RSI) below the overbought level, support the momentum's continuation without immediate signs of reversal. The proximity of the price to the upper Bollinger Band further indicates the strength of the current uptrend.

In summary, GE's Q4 earnings report exceeded expectations, beating estimates in terms of revenue, segment EBIT, EPS, and FCF. Despite GE Aerospace slightly underperforming, the strong results in other segments, such as Power and Renewable Energy, contributed to the overall positive performance. GE's guidance for Q1 2024 fell below analyst consensus, but this conservative approach is consistent with previous years. As GE prepares for the launch of GE Vernova and GE Aerospace as independent companies, the future outlook remains optimistic.

$GE(GE)


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