3 min read.Updated: 25 Jan 2022, 07:33 PM ISTTHOMAS GRYTA, The Wall Street Journal
Conglomerate projects return to revenue growth in 2022, fueled by growth in aviation unit
General Electric Co. reported fourth-quarter revenue fell 3%, weighed down by supply-chain difficulties, and projected a return to sales growth in 2023 as its aviation business begins to recover.
The Boston conglomerate reported free cash flow from its industrial operations of $3.8 billion, bringing the full-year total to $5.1 billion, and projected 2022 cash flow of $5.5 billion to $6.5 billion. GEplans to split into three separate public companies over the next two years while it navigates the pandemic’s impact on its aviation business and supply chain problems.
“We’re seeing real momentum and opportunities for sustainable profitable growth from near-term improvements in GE’s businesses, especially as Aviation recovers and our end markets strengthen," GE Chairman and Chief Executive Larry Culp said.
GE’s stock is up about 2.6% in the first weeks of 2022, closing Monday at $96.91, but remains well below $111.29 reached Nov 9, the date of the split announcement.
GE expects 2022 adjusted earnings of $2.80 to $3.50 a share, below the $4 a share projected by analysts, according to FactSet. The company expects revenue to grow in the high-single digits driven by Aviation growth of more than 20%.
Overall, GE swung to a net loss attributable to common shareholders of $3.9 billion for the fourth quarter, mostly dragged down by debt repayment costs, compared with a year-earlier profit of $2.4 billion.
Excluding items, GE said its adjusted earnings were 82 cents a share, compared with Wall Street‘s estimate of 85 cents a share. Including earnings from GE’s legacy insurance business, adjusted earnings were 92 cents a share. Revenue fell to $20.3 billion from $21 billion a year earlier, also missing analyst expectations of $21.31 billion, according to FactSet.
After cash flow fell to $600 million in 2020 from pandemic pressure, the company targeted $5 billion for 2021 and expects to exceed $7 billion in 2023. It hadn’t yet provided its projections for 2022. GE had industrial cash flow of $9 billion in 2016.
GE said it expects “continued inflation challenges" for 2022 with the biggest hit in its onshore wind-turbine business.
The separation of the major business will start with the Healthcare division early next year. The power and renewables business will combine and form a separate company in early 2024. Existing GE shareholders will get new shares in the two companies after they are spun off.
Since taking over as the first outsider to run GE in 2018, Mr. Culp has sold off businesses, overhauled manufacturing practices and decentralized the management of GE’s divisions, making them responsible for their own investments and costs. In November, GE divested its jet-leasing business for more than $30 billion, allowing it to pay down more debt and fold the remainder of GE Capital, its once-massive financial-services business, into the company’s corporate operation.
On Tuesday, the company reported results without separate financial results for GE Capital, a move intended to simplify GE’s reporting for investors.
GE’s Aviation division revenue rose 4% on segment profit of $1.2 billion while orders rose 22% in the quarter. The results were driven by commercial-service revenue, and GE said the division “continues to evaluate and manage the impact of Omicron." Last month, GE projected Aviation revenue would return to pre-pandemic levels in 2023.
Revenue in the health-care division, which makes CT scanners, MRI machines and other hospital equipment, fell 4% because of continuing supply shortages. Profit margins dropped to 16.5% from 19.7% in Healthcare during the quarter from shortages and inflation pressure, GE said.
Revenue dropped 13% in the power unit, which makes turbines for power plants, to $4.66 billion, while revenue in the renewable energy unit, which mostly makes wind turbines, fell 6% to $4.19 billion.
GE has cut its gross debt by $87 billion in the past three years, ending 2021 with about $35 billion in debt, $16 billion in cash and $13 billion in shares of AerCap Holdings NV and Baker Hughes Co.
This story has been published from a wire agency feed without modifications to the text