GE beats Q4 expectations, gives disappointing full-year outlook; grappling with inflationary headwinds.
GE beats Q4 expectations, inflationary headwinds, disappointing full-year outlook, reducing headcount, spin-off energy businesses.
General Electric Co (GE.N) reported better than expected quarterly earnings on robust demand for jet engines and power equipment. However, the company gave a disappointing full-year outlook due to problems at its renewable energy business. This was in line with other industrials such as 3M and Raytheon Technologies Corp, who also flagged inflationary headwinds and a cooling U.S. economy, clouding the corporate outlook for the coming year.
GE CEO Larry Culp said that while demand for freight carriers was slowing, the company was confident a recovery in the aerospace industry and the need to reduce carbon emissions would underpin demand for GE’s products. The company is dealing with inflationary and supply-chain pressures, and is adjusting prices to offset higher costs. Raytheon expects labor and material inflation to cost it about $2 billion in 2023, while 3M said inflation was boosting the cost of raw materials and logistics.
GE has deployed hundreds of employees at sites of its aerospace suppliers to ease some of the bottlenecks. The company forecast full-year adjusted earnings in the range of $1.60 to $2.00 per share this year, lower than analysts’ average forecast of $2.36 per share. It also expects to burn cash in the March quarter, which tends to be its weakest. GE expects an operating loss of between $200 million and $600 million at its energy business GE Vernova in 2023.
The company is reducing global headcount at its onshore wind unit by about 20% as part of a plan to restructure and resize the business. Culp said the onshore business is expected to get a boost following the restoration of the tax credit for wind projects. He said high inflation is also posing a challenge for offshore wind business as it is making customers review the economics of their projects. GE plans to spin off its energy businesses, including renewables, into a separate company next year.
GE reported an adjusted profit for the fourth quarter of $1.24 per share, beating analysts’ average estimate of $1.13 per share. Despite these positive results, the company is facing a number of challenges due to inflation and supply chain pressures. Inflation is pushing up the cost of raw materials, logistics, and labor, while supply chain issues are causing bottlenecks. GE is taking steps to adjust prices and deploy employees to suppliers to ease the pressure, but the company is still expecting a lower than expected full-year outlook and to burn cash in the March quarter.
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