General Electric (GE) reported better-than-expected earnings and revenue for the second quarter of 2023, driven by strong performance in its aviation, healthcare, and renewable energy segments. The company also raised its full-year guidance for earnings, revenue, and cash flow, signaling confidence in its recovery from the pandemic.
GE posted adjusted earnings of $0.68 per share, beating the consensus estimate of $0.62 per share. Revenue rose 19% year-over-year to $15.9 billion, surpassing the consensus forecast of $15.6 billion. Free cash flow was positive at $1.1 billion, compared to a negative $1.5 billion in the same quarter last year.
GE’s aviation segment, which accounts for about a third of its revenue, saw a 28% increase in revenue to $4.8 billion, as demand for commercial and military aircraft engines recovered from the pandemic-induced slump. GE’s healthcare segment, which provides medical equipment and services, grew its revenue by 14% to $4.3 billion, as hospitals and clinics resumed elective procedures and diagnostics. GE’s renewable energy segment, which produces wind turbines and solar panels, boosted its revenue by 35% to $3.7 billion, as orders for green energy projects surged.
General Electric faces some headwinds and tailwinds ahead
However, GE still faces some headwinds and tailwinds ahead that could affect its stock performance. Some of the factors that could influence GE are:
- Supply chain challenges: GE faces some supply chain challenges that could increase its costs and affect its delivery schedules. For example, GE’s aviation segment has been impacted by the global shortage of semiconductors, which are used in its engine control systems. GE’s renewable energy segment has also faced higher costs for raw materials, such as steel and copper.
- Regulatory uncertainty: GE faces some regulatory uncertainty that could affect its business outlook and strategy. For example, GE’s power segment, which provides gas and steam turbines for electricity generation, could face more environmental regulations and competition from renewable energy sources. GE’s planned spin-off of its healthcare segment in 2024 could also face scrutiny from antitrust authorities or tax implications.
- Market opportunities: GE faces some market opportunities that could boost its growth and profitability. For example, GE’s aviation segment could benefit from the recovery of air travel demand and the expansion of its service contracts with airlines. GE’s healthcare segment could benefit from the aging population and the increasing demand for digital health solutions. GE’s renewable energy segment could benefit from the global transition to clean energy and the innovation of new technologies.
General Electric stock could continue higher in the near term
According to Schaeffer’s Senior Quantitative Analyst Rocky White, GE stock has shown signs of a bullish trend reversal after bouncing off its 40-day moving average. The stock has tested this trendline three times in the past three years, and each time it has moved higher in the next month, averaging a gain of 3.5%. White said in a note to clients on Tuesday: “Index appears to have bottomed out as the daily signal (grey) is projecting upside pressure. After four weeks of consolidation, this indicator is tactically bullish and General Electric stock prices could resume the uptrend.”
GE stock has also received positive ratings from several analysts who have raised their price targets or upgraded their recommendations on the stock. For example, Morgan Stanley analyst Joshua Pokrzywinski raised his price target on GE stock from $120 to $130 and maintained his overweight rating on Tuesday. He said that GE’s earnings showed “solid execution” and “improving end markets”. He also said that GE’s valuation was attractive compared to its peers.
GE stock closed at $106.32 on Wednesday, up 0.6% for the day and 73.6% for the year-to-date. The stock has outperformed the S&P 500 index ($SPX), which has gained 19% for the year-to-date.
