GE stock tumbles over 8% as inflation threatens outlook

Posted: 26 April 2022 10:43 am
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The industrial company’s renewable energy and power sales declined in the first quarter.

Shares of General Electric (GE) slumped more than 8% in early Tuesday trading after the company said it’s trending toward the low end of its 2022 financial guidance. The company is grappling with inflationary pressures and the impact of the Russia/Ukraine war.
The company’s renewable energy and power segments saw revenue decline in the first quarter, hurt by both inflation and supply chain constraints.

What happened?

GE reported an 85% surge in adjusted earnings to $0.24 per share, topping analysts’ estimates that called for $0.19 per share. That’s not enough to boost shares as investors price in the risk that inflation and other pressures are dimming the company’s outlook for the rest of the year.
Revenue for the first quarter was flat at $17.04 billion, better than the average analyst estimate of $16.9 billion, according to data from Yahoo Finance. GE reported growth in just two of its four segments, aviation and healthcare. Revenue for its renewable energy and power businesses fell compared to the same quarter last year.

While GE is keeping its 2022 guidance for adjusted earnings per share of between $2.80 to $3.50, the company said heightened challenges are hurting its outlook.
“We’re holding the outlook range we shared in January, but as we continue to work through inflation and other evolving pressures, we’re currently trending toward the low end of the range,” GE Chairman and CEO H. Lawrence Culp, Jr. said in a statement.
The industrial company is also closely monitoring supply chain disruptions and material and labor availability and their impact on the bottom line. Mitigation actions and the duration and magnitude of COVID-19’s impact in China could impact GE’s full-year prospects, according to its earnings release.
“At Healthcare, while demand remains strong, we’re continuing to experience pressure due to both inflation and supply chain constraints,” Culp Jr. said. “Renewable Energy equipment was pressured due to inflation and reduced demand in North America Onshore Wind.”
GE cited additional risks to its financial outlook posed by shifts in macroeconomic and market conditions, rising commodity prices and volatility in exchange rates.

Thinking of buying GE stock?

GE stock is down about 15% so far in 2022 and has slumped more than 29% from its 52-week high of $116.17.
For a 5-year view of the performance of this stock, see the graph in our dedicated guide.
Before GE earnings were released, seven of the 17 analysts tracked by Yahoo Finance had strong buy and buy recommendations on the stock. Six had hold recommendations, while three saw the shares underperforming. Analysts, on average, had a target price of $110.22 on the stock, representing further upside from Tuesday’s price of about $82, although the latest results may prompt them to revisit their figures.
Looking ahead, the same macroeconomic factors are likely to persist, at least in the near term. This could continue to negatively affect the company’s gross profit and stock price.

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At the time of publication, Matt Miczulski did not own shares of any equity mentioned in this story.

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