General Electric (GE) 22Q3 Update

GE announced 22Q3 revenues of $19.5 billion, up 0.5% year-over-year, a GAAP loss per share of $0.14, compared with 21Q3’s $0.54 profit, and non-GAAP EPS of $0.35, below 21Q3’s $0.53.  I had anticipated a GAAP EPS of $0.44 per share and non-GAAP EPS of $0.75.

During the quarter, GE recorded a $505 million charge at GE Renewable Energy to cover estimated warranty costs for its onshore wind turbines. Excluding that charge, GE’s non-GAAP EPS was $0.75.  Excluding the warranty reserve charge, much stronger performance at GE Aerospace offset declines at the other three businesses and higher income taxes.

Based mostly upon the impact of the warranty reserve charge, the weaker performance at GE Renewable Energy and weaker than previously anticipated performance at GE Power, the company reduced its full year 2022 non-GAAP EPS guidance to $2.40-$2.80, down from the low end of the $2.80-$3.50 range previously.  It now expects full year free cash flow of $4.5 billion.  My revised earnings projections are in line with that guidance.

Despite the disappointing developments at GE Renewable Energy, I am maintaining my strong buy rating and price target of $90.  My price target needs to be updated considering GE HealthCare’s Form 10 filing and the recent declines in the broader market’s valuation multiple.  I will provide an updated analysis, including 2023 estimates for GE post-the HealthCare spin-off, in November, after the end of the 22Q3 earnings season.

This is a summary of my recent update report on General Electric Company (GE). For a copy of the full report, reach out to me using the contact information provided below:

October 27, 2022

Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250

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