Shares of General Electric (NYSE:GE) are surging after the struggling industrial giant reported first-quarter earnings that surpassed Wall Street expectations and reaffirmed its financial outlook for the year. GE roses as high as 7% in early trading, before partially paring those gains.
GE posted adjusted first-quarter earnings per share of 16 cents on revenue of $28.6 billion, beating expectations of 12 cents and $27.52 billion, respectively. These results were fueled by strong performance by the company’s aviation, health-care, renewables, transportation and corporate units, partly offset by power, oil and gas and GE Capital units.
Looking ahead, GE reiterated its C18 guidance, which calls for adjusted EPS of $1.00-1.07 and adjusted industrial FCF of $6-7 billion. While the potential for just $1 in earnings from GE in 2018 doesn’t make the stock a good investment, investors cheered the fact that guidance seems to have stabilized after multiple cuts in the past year. Cowen analyst Gautam Khanna pointed out that given the strong start in Q1 at other segments the reiterated guidance may be viewed as credible, even though Aero mix should weaken throughout the year as LEAP deliveries ramp and Power backlog converts to sales.
GE Chairman and CEO John Flannery commented, “The first quarter is a step forward in executing on our 2018 plan and we are seeing signs of progress in our performance […] Industrial earnings, free cash flow, and margins all improved year over year. We reduced Industrial structural costs by $805 million and are on track to exceed our cost reduction goal of $2 billion in 2018.”
“Aviation, Healthcare, Renewables, and Transportation grew earnings, and BHGE continues to execute on its plan. Power is making progress on cost actions and operational and services execution, but the industry continues to be challenging and is trending softer than our forecast […] We are working to resolve legacy matters in our discontinued operations, and we recorded a reserve of $1.5 billion related to the WMC FIRREA investigation. We are making significant progress on the $20 billion of dispositions planned for 2018 & 2019. There is no change to our framework for 2018,” Flannery continued.
Wall Street is not convinced that Flannery’s industrial empire’s reward is worth all the risk, especially when taking note that TipRanks analytics exhibit GE as a Hold. Based on 14 analysts polled in the last 3 months, 2 rate a Buy on General Electric stock, 9 maintain a Hold, while 3 recommend a Sell on the stock.