General Electric Co. (GE, Financial) released its first-quarter results before the opening bell on April 27. The U.S.-based industrial conglomerate registered better-than-expected earnings for the quarter thanks to robust sales in the power and renewable energy segments. Revenue, however, missed projections.
The company's shares plunged 3.5% to $13.08 per share in premarket trading following the earnings announcement.
Performance at a glance
The company recorded adjusted earnings of 3 cents per share for the quarter, which surpassed Wall Street's estimates of 1 cent per share. The company reported earnings of 5 cents for the same period last year. Revenue dropped 12% to $17.1 billion, falling short of the anticipated $17.52 billion.
In a statement, Chairman and CEO H. Lawrence Culp Jr. said:
"I am proud of the GE team's solid first quarter results, despite a still difficult environment for Aviation. We are improving our cash performance and profitability with Industrial free cash flow growth of $1.7 billion year-over-year, excluding BioPharma, and organic margin expansion across all segments, except Aviation. This continued progress sets us up well to deliver on our 2021 commitments."
The industrial free cash outflow for the quarter, one of the most important metrics, came in at $845 million versus the expected $1.5 billion. In 2021, the company projects its industrial cash flow to be around $2.5 billion to $4.5 billion.
While total orders dipped 13% to $17 billion, organic orders tumbled 8% year over year.
Segment performance
The conglomerate's aviation division recorded a 28% revenue decline to $4.99 billion. Equipment orders were down as the company sold fewer engines as compared to the year-ago quarter. Commercial service revenue plunged year over year, driven by decreased commercial spare part shipments coupled with lower shop visits. Due to the external headwinds from the 737 Max as well as a decline in demand for air travel amid the coronavirus pandemic, the segment witnessed a decline of 36% in operating profit to $641 million.
In the health care space, the company reported sales of $4.31 billion, which reflected a decline of 9% from the year-ago quarter. Orders bagged were valued at $4.47 billion, down 15%. Segment profit came in at $698 million, which tumbled 19% as reduced costs were more than offset by headwinds in logistics and supply chain.
Revenue in the power segment amounted to $3.92 billion, which dropped 3% compared to the prior-year quarter. Likewise, its orders dipped 12% to $3.63 billion. The renewable energy segment witnessed a growth of 2% in revenue to $3.25 billion. Orders in the segment grew 15% to $3.52 billion.
Looking ahead
Culp warned that commercial aviation is going to witness a prolonged plunge. However, he feels the aviation unit should report a sequential rise in earnings and cash generation in the second half 2021 given the present efforts. The company reduced as much as 25% of its global workforce last year on a permanent basis in the aviation unit. Culp expects the segment to report positive industrial free cash flow this year.
As part of its cost-saving initiative, the conglomerate said it will trim costs to the extent of more than $2 billion in order to negate the impact of the Covid-19 pandemic. In addition, the company said it will implement cash-saving actions of $3 billion.
Disclosure: I do not hold any positions in the stocks mentioned.
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