General Electric (GE) reported better-than-expected early Tuesday amid signs of improving aerospace supply chains. GE stock, already in buy range, rose modestly before the open.
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GE Earnings
Estimates: Analysts, on average, expected GE earnings per share of 46 cents on revenue of $14.762 billion. Year-over-year comparisons are muddied by the GEHC spinoff.
Results: GE earnings came in 68 cents a share, with revenue of $16.7 billion, or adjusted revenue of $15.9 billion. Orders surged 59% to $22 billion.
Outlook: GE raised its full-year EPS estimate to $2.10-$2.30 from $1.70-$2. Wall Street had forecast GE earnings per share of $2.06, before the Q2 beat.
GE has also guided 2023 organic revenue growth in the low double digits vs. its old target of the high single digits. It now sees free cash flow of $4.1 billion-$4.6 billion, up from $3.6 billion-$4.2 billion.
GE Stock
GE stock jumped 4% to about 115 before the open in Tuesday’s stock market trading. On Monday, shares dipped two cents to 110.31. Shares of the soon-to-be aerospace pure play have ridden short-term support at their 21-day exponential moving average. In late June, they dipped to rebound from the 50-day moving average, clearing a 108.90 buy point from a three-weeks-tight pattern. The buy zone goes to 114.35.
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GE Aerospace: Improving Supply Chains
At the recent Paris Air Show, both GE and Raytheon Technologies (GE) signaled improvements in the aerospace supply chain.
The jet-engine rivals are trying to ramp up output of newer products, like GE’s Leap engine, which powers Boeing (BA) 737 aircraft. Availability of materials and workers remains an issue.
Analysts at RBC Capital Markets anticipate Q2 growth for General Electric, driven by the jet-engine business. They also expect higher GE earnings guidance for the full year. The firm’s analyst Deane Dray said in a July 12 report that he expects GE “to benefit from the nascent rebound in commercial aerospace.”
GE spun out General Electric HealthCare Technologies (GEHC) late last year. It plans to spin out its energy business, as GE Vernova, in early 2024. That will allow GE Aerospace, the so-called jewel in the portfolio, to emerge as a stand-alone company.
Analysts are watching progress on the spinout of GE’s more challenging energy business.
“We will be listening (on the GE earnings call) to see if any of the recently reported wind turbine quality issues at Siemens (SIEGY) have surfaced at GE, to any degree,” Dray said.
Amid these cross-currents, excitement about GE Aerospace has sent GE shares to a five-year-plus high.
Year to date, GE stock is up 68.7%, including a 10.1% jump in the past three months.
Last Friday, Roper Technologies (ROP) delivered a Q2 beat-and-raise report.
The conglomerate saw 9% organic sales growth during the quarter.
“All three segments reported operating upside vs. expectations.” RBC analyst Dray wrote in a note Monday. In addition, Roper “more than passed through” the Q2 EPS beat to the higher guidance range for 2023.
The analyst has an outperform rating on Roper stock and hiked his price target to $569, from $532. On Monday, ROP stock pulled back nearly 1%, near 495, after gapping up 3.7% on Friday.
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