Why was the General Electric report a positive surprise?
Industrial conglomerate General Electric Co. (GE) reported unexpectedly high profits in the second quarter. This surprise was the reason for the growth of quotations. At the auction on July 26, GE’s stock was worth $71.51. In the second quarter, General Electric expected a profit of about $0.4 per share, which amounted to $0.76. Adjusted revenue rose to $17.88 billion. General Electric has cut its annual free cash flow forecast as the company is still experiencing supply chain problems, which inflation also has.
The aviation industry is recovering, and GE was able to increase profits thanks to increased demand for jet engines was the main driver of profit growth in the second quarter and an increase in cash flow to $162 million. GE is currently at the lower end of the forecast range of $2.8—$3.5 annual earnings per share. It should note that General Electric continues to divide the business into three public companies: GE Aviation (aviation segment), GE HealthCare (healthcare), and GE Vernova (renewable energy). The separation will take place in 2023-2024. It depends on the conditions for restructuring. Perhaps the model of industrial conglomerates is becoming outdated. At least a specialized business can attract investment more quickly.
Each of the separated businesses will have growth potential. GE’s aviation segment is currently showing the fastest pace: in the second quarter, its revenue grew by 27% year-on-year to $6.13 billion. The growth of the green energy segment slowed down due to a reduction in orders for wind farms amid supply problems and inflation. The advantage of GE’s aviation business is that it supplies and repairs engines for all leading aircraft manufacturers, including Boeing and Airbus.
