General Electric Company GE shares were rocketing higher Wednesday after the company beat analyst estimates for third-quarter revenue and reported a surprise profit.
What Happened: GE reported adjusted third-quarter earnings per share of 6 cents, beating analyst estimates of a 4-cent loss. Quarterly revenue of $19.42 billion also exceeded analyst expectations of $18.73 billion. Revenue was down 16.8% from a year ago.
Aviation revenue dropped 39% in the third quarter, and health care revenue was down 7%. GE reported $514 million in industrial cash flow, down from $650 million a year ago.
Looking ahead, CEO Larry Culp said GE is targeting industrial free cash flow of $2.1 billion in the fourth quarter and expects that cash flow to remain positive in 2021.
Why It’s Important: BofA Securities analyst Andrew Obin said in a note that GE’s earnings and free cash flow numbers are encouraging.
“Net-net, 2H FCF outlook of ~$3.0bn compares favorably with our prior $2.7bn forecast and we believe was well ahead of buy-side expectations,” the analyst said.
GE’s order log is still relatively weak, and the company is setting aside reserves following the SEC’s recent announcement that it is considering a possible civil suit against GE related to the company’s insurance business, he said.
Industrial orders dropped 28% in the third quarter. GE reserved about $100 million for all ongoing SEC investigations.
Overall, Obin said GE’s quarter was better than expected, and he’s bullish on the stock given its operations improvements, attractive valuation and medium-term FCF trajectory.
BofA has a Buy rating on GE with an $11 price target.
GE Price Action: GE shares were trading 8.66% higher at $7.72 at last check Wednesday.
Benzinga’s Take: The earnings beat was much needed for GE investors after the company disclosed it received a Wells notice from the SEC indicating a potential lawsuit earlier this month.
GE investors are likely growing tired of hearing about how a turnaround is just around the corner after years of underperformance and lackluster cash flow and earnings numbers, and the stock remains a show-me story at this point.
Photo by Bubba73 via Wikimedia.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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