GE beats estimates after surge in aircraft sales

General Electric beat Wall Street’s second-quarter profit expectations and reported surprise positive cash flow as sales of the key jet engine division soared, supporting the conglomerate despite power problems. supplies which continue to weigh on the balance sheet.

GE Aerospace sales jumped 27% while orders climbed 26% during the period, the company said in a statement Tuesday, as the rebound in travel boosted demand. That helped push the parent company’s earnings to 78 cents per share, easily beating the 37-cent average of analyst estimates compiled by Bloomberg.

“While revenue strength was broad-based across all segments, aviation stood out this quarter as the business recovery continues to climb,” RBC Capital Markets analyst Deane Dray said in a note. . He also pointed to free cash flow as a “bright spot.”

The results gave GE a boost even as it cut its cash flow forecast for this year and said it expects a negative impact from insurance accounting changes. While GE is still trending down from its previous financial guidance on most metrics, the company said about $1 billion in free cash flow is likely to project into the future due to the challenges of the supply chain and declining renewable energy orders.

“There is still a lot of uncertainty about the external pressures that companies are facing right now,” Chief Executive Larry Culp said in the statement.

The CEO continues to battle inflation, supply problems and falling demand for wind turbines as he oversees preparations to break up the once mighty conglomerate from next year. China’s lengthy COVID-19 shutdowns and soaring U.S. dollar have added to the challenges facing the maker of jet engines, electrical equipment and hospital scanners.

Shares of GE rose 4.56% on Tuesday to close at $71.49, its eighth consecutive gain. GE has fallen 28% this year through Monday’s close.

The GE breakup remains on track, Culp said, with the spinoff of GE Healthcare scheduled for early 2023. GE then plans to combine its energy businesses spanning gas equipment, wind turbines and digital and separate them a year later.

Culp oversaw preparations for the spinoff and recently announced rebranding for the companies once they part ways with the conglomerate. GE’s energy business, for example, will be called GE Vernova, a portmanteau of the company’s ambition to offer low-carbon energy products.

GE’s aerospace business – now known as GE Aerospace – will continue as the remaining GE entity. Culp recently took on the additional role of CEO of the unit, with John Slattery, who had been CEO since 2020, moving to Chief Commercial Officer.

Aerospace has been a source of strength over the past quarter, Culp said, although he acknowledged that material availability continues to be an issue. The company has encountered difficulties in delivering engines to customers such as Boeing and Airbus.

“They need more engines from us, we want to get them more engines, and we couldn’t be more focused on increasing our throughput,” Culp said in an interview.

GE Healthcare’s sales rose about 1% in the quarter while segment profit fell 19% due to supply chain pressures and pandemic-related issues in China.

The renewables unit extended its operating loss streak to 15 straight quarters, underscoring the division’s status as the biggest sore spot in GE’s portfolio. Much of the trouble is centered in GE’s onshore wind business, which is facing a major demand slowdown in the United States.

Free cash flow across the business — a closely watched measure of underlying profitability — in the latest quarter was $162 million, better than analysts’ expectation of $864 million.

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