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GE’s slowing aerospace growth could hamper fourth-quarter earnings performance

by SuperiorInvest

Key takeaways

  • General Electric Co. (GE) is expected to post sharp year-over-year (YOY) declines in net income, revenue and diluted EPS when it reports fourth-quarter 2023 results on Tuesday before the market opens.
  • GE’s aerospace segment could see revenue growth slow to 11% year-over-year, the lowest level in two years, as the post-COVID surge in the airline business fades.
  • Once the GE Vernova energy business unit is spun off in the second quarter of 2024, the company’s aerospace division will be the only remaining unit.

General Electric Co. (GE), the longtime industrial leader that has scrapped several units in recent years, is forecast to report a sharp year-over-year (YOY) decline in diluted earnings per share (EPS) and revenue for the latest quarter. of 2023 when it releases the results on Tuesday morning. The company’s main aerospace segment is expected to post its slowest growth in two years.

GE is likely to say net income fell more than half to $915.2 million compared with the same period a year earlier, while revenue fell more than 18% to $17.8 billion. Diluted EPS is expected to be 88 cents, compared to $1.79 in the fourth quarter of 2022.

General Electric analyst estimates for the fourth quarter of 2023
Analyst estimates for the fourth quarter of 2023 Third quarter of 2023 Fourth quarter of 2022
Revenue 17.8 billion dollars $17.3 billion $21.8 billion
Diluted earnings per share ($) $0.88 $0.23 $1.79
Net income $915.2 million $258.0 million 1.99 billion dollars
Source: Visible Alpha

Key metrics

Investors should keep an eye on revenue numbers from GE’s core aerospace division, which has posted several consecutive quarters of sales growth above 20%. When GE completes the spinoff of its energy division as GE Vernova early in the second quarter of this year, the aviation business will be the only remaining unit. GE’s aerospace division serves the needs of commercial and military aircraft and includes the design and production of engines and engine components, mechanical and power systems.

Analysts predict GE’s aerospace revenue growth will slow to just over 11%, reaching $8.5 billion by the fourth quarter of 2023. This would mark the slowest pace of growth for the segment in two years. GE’s aerospace business received a significant boost as airlines returned to normal operations following the COVID-19 shutdown, but that increase may be slowing.

Business focus

Since announcing the timeline for the GE Vernova spinoff in October, GE has heavily promoted its efforts in the energy business. In the last quarter of the year, the company announced the participation of GE Vernova in important energy infrastructure projects in Spain, the US and the United Kingdom, among others. The company may be working to bolster this business ahead of its separate listing on the New York Stock Exchange (NYSE) later this year.

GE shares have risen steadily over the past year, rising about 62% in the year to January 19.

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