GE announced 22Q4 revenues of $21.8 billion, up 7.3% year-over-year, GAAP EPS of $1.93, compared with 21Q4’s $3.26 loss, and non-GAAP EPS of $1.24, up 52% over 21Q4’s $0.82. I had anticipated a GAAP EPS of $0.38 per share and non-GAAP EPS of $1.26.
During the quarter, GE recorded $2.2 billion of other income, mostly as a result of a rebound in the value of its 46% equity stake in AerCap Holdings. Excluding that gain, GE’s GAAP profitability was below my expectations, with lower than projected segment profit from GE Aerospace offset by better than anticipated results at GE Healthcare, Renewable Energy and Power. Corporate costs were also greater than expected, due to higher restructuring and separation costs.
GE completed the spin-off of GE Healthcare Technologies (GEHC) on January 4. Excluding GEHC, the company’s guidance for 2023 anticipates organic revenue growth in the high single-digits, adjusted non-GAAP EPS of $1.60-$2.00 and free cash flow of $3.4-$4.2 billion. My projections are in line with that guidance, with revenue growth of 8.6%. adjusted EPS of $1.92 and free cash flow of $3.8 billion.
At its 2/24 closing price of $83.55, GE’s stock is valued at 84 times projected GAAP earnings of $0.99 and 43 times projected non-GAAP earnings of $1.92. That high valuation reflects the anticipated break-up values for GE Vernova (which comprises GE’s Renewable Energy and Power businesses) and GE Aerospace. My sum-of-the parts analysis for GE (including each of its business segments plus GE’s investments in AerCap Holdings, N.V. (AER) and GE Healthcare (GEHC) and its remaining required capital contribution to its run-off insurance operations) suggests a potential value range of $85-$112 per share, when the spin-off of GE Vernova is completed in early 2024. At $99, which is the midpoint of the range, the potential return, including GE’s $0.32 annual dividend, is 18.4%. Accordingly, I am raising my performance rating on GE’s stock from “3” (Neutral) to “1” (Strong Buy). The price target assumes that all three of GE’s businesses will achieve improved performance this year, consistent with my projections and GE’s guidance.
This is a summary of my recent update report on General Electric Company (GE). To obtain a copy of the full report, reach out to me using the contact information provided below.
March 8, 2023
Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250
admin@larkresearch.com
© 2015-2024 by Stephen P. Percoco, Lark Research. All rights reserved.
This blog post (as with all posts on this website) represents the opinion of Lark Research based upon its own independent research and supporting information obtained from various sources. Although Lark Research believes these sources to be reliable, it has not independently confirmed their accuracy. Consequently, this blog post may contain errors and omissions. Furthermore, this blog post is a summary of a recent report published on this subject and that report provides a more complete discussion and assessment of the risks and opportunities of any investment securities discussed herein. No representation or warranty is expressed or implied by the publication of this blog post. This blog post is for informational purposes only and shall not be construed as investment advice that meets the specific needs of any investor. Investors should, in consultation with their financial advisers, determine the suitability of the post’s recommendations, if any, to their own specific circumstances. Lark Research is not registered as an investment adviser with the Securities and Exchange Commission, pursuant to exemptions provided in the Investment Company Act of 1940. This blog post remains the property of Lark Research and may not be reproduced, copied or similarly disseminated, in whole or in part, without its prior written consent.