GE Earnings: What Should You Look For?

Key learning points

  • Analysts estimate adjusted earnings per share of $0.03 versus -$0.16 for the second quarter of 2020.
  • Aviation segment revenue is expected to grow for the first time in six quarters.
  • Company-wide revenue in the second quarter is expected to improve YOY for the first time in three years.

general electric co. (GE) has experienced a series of declines in profits, losses and declining revenues during the COVID-19 pandemic and ensuing economic disruption. That poor performance is the result of GE’s massive restructuring in recent years, including asset sales and debt servicing. GE can raise more than $20 billion in the upcoming sale of its aircraft lease unit, and some analysts expect GE to end its healthcare business as well.

Investors will be watching for signs of a turnaround when GE’s Q2 FY 2021 earnings report on July 27 before the market opens. Analysts expect an improvement year-over-year (YOY), with both adjusted earnings per share (EPS) and sales rising.

Investors will also likely be looking at the performance of GE’s aerospace revenues, an important metric. This part of GE’s business is closely linked to the aerospace industry, which is starting to recover from a major disruption earlier in the pandemic. Consensus estimates predict GE’s aviation segment revenues will increase YOY for the first time since Q4 FY 2019.

GE shares lagged the market from mid-July to October last year before booming around the release of the company’s Q3 FY 2020 results. Since early November, the stock has significantly outperformed the market, although it has generally traded sideways since March 2021. On July 21, GE stock delivered a 1-year total return of 86.6%, well above the S&P 500’s total return of 33.8%.

Source: TradingView.

GE Earnings History

GE’s adjusted earnings per share slumped early in the pandemic and fell significantly in Q1 FY 2020. That was followed by a loss for the first time in at least 10 quarters for Q2 FY 2020. Even before the pandemic, earnings improvement was elusive as GE posted YOY. declines for five quarters in FY 2018 and FY 2019. Adjusted EPS improved on a sequential basis for Q3 and Q4 FY 2020, but the company still posted significant YOY declines for each of those quarters. Q1 FY 2021 saw a new YOY and sequential decline. Now investors expect adjusted earnings per share to be $0.03 for the second quarter of 2021, compared to a loss a year earlier.

GE has also faced significant challenges in growing sales. The company posted 11 consecutive quarters of YOY sales declines, starting in Q3 FY 2018. With the exception of Q2 FY 2020, which was the largest YOY decline in recent years, declines during the pandemic were more modest than those in late FY. 2018 and early FY 2019. Investors estimate that Q2 FY 2021 will see the first YOY improvement in sales since Q2 FY 2018. Nevertheless, that sales figure will still be the lowest in the past 14 quarters, except for Q1 FY 2021 and Q2 FY 2020.

GE key stats
Estimate for Q2 FY 2021 Q2 FY 2020 Q2 FY 2019
Adjusted Earnings Per Share $0.03 -$0.16 $0.16
Revenue (billions) $18.0 $17.8 $23.4
Airline segment revenue (billions) $5.2 $4.4 $7.9

Source: Visible alpha

The most important statistic

As noted, investors will also track revenue generated by GE’s aerospace segment, which designs and manufactures aircraft engines, components, power supplies and other systems for both commercial and military applications. GE’s aviation business is dependent on the aerospace and aerospace industries, both of which rely heavily on recovery. These industries are starting to recover, thanks in large part to COVID-19 vaccinations and customers who are more willing to plan travel. As a result, GE’s aviation revenue could increase. Further, because the company’s aviation business is tied to recovery, a strong performance in this area could be evidence of a strong recovery overall.

GE’s airline revenue declined from Q1 FY 2020 after 8 consecutive quarters of YOY gains. Sales then fell 44.3% in the second quarter of 2020, the worst performance in recent years. That was followed by steep declines over the next three quarters through Q1 FY 2021, although the magnitude of the declines narrowed. Overall, the company has seen five consecutive quarters of YOY flight revenue decline during the first quarter of this year. Analysts expect this trend to reverse in the second quarter of 2021. They estimate a 19% increase in revenue growth, which would be the highest rate since the fourth quarter of 2018.