GE boosts outlook on aerospace gains, rebound in renewables

General Electric Co. raised its full-year guidance and reported second-quarter results that blew past Wall Street’s expectations as the manufacturer capitalizes on rebounding renewable-energy orders and an air travel boom that continues to drive demand for jet engines.

Adjusted earnings in 2023 will be $2.10 to $2.30 a share, the maker of aerospace and power-generation equipment said Tuesday in a statement. That’s up from no more than $2 and above the $2.05 average of analyst estimates compiled by Bloomberg. GE now expects free cash flow of as much as $4.6 billion compared to no more than $4.2 billion under its prior outlook.

“With the demand that the airlines continue to see, the push in turn on our services business couldn’t be stronger,” Chief Executive Officer Larry Culp said in an interview. “It’s hard to argue with just the broad-based strength that we’re seeing at aero.”

GE’s shares jumped 4% as of 7:33 a.m. before regular trading in New York.

The stock has soared nearly 70% this year amid renewed investor interest in the once-sprawling conglomerate as Culp prepares the company to become a pure-play aerospace manufacturer by early next year. GE has said it plans to more than double earnings this year amid booming demand for jet engines and maintenance services at GE Aerospace, which generates the majority of company profits.

Since becoming CEO in 2018, Culp has sold huge businesses, slashed debt and overhauled factory operations to reshape the iconic corporation from a troubled giant to a smaller, more streamlined company. GE Aerospace, which primarily manufacturers and services military and commercial jet engines, will become a standalone business next year following the early 2024 spinoff of GE Vernova, the power-generation and renewable-energy units.

Adjusted earnings were 68 cents a share in the second quarter, well above of the 46-cent average of analyst estimates. Revenue soared 19% to $15.9 billion compared $14.7 billion expected by Wall Street.

Cash Flow Beat

Free cash flow — a closely watched measure of earnings power by GE investors — was $415 million, better than the $153 million estimated by analysts. 

GE Aerospace orders surged 37% in the quarter while sales jumped. Profit margins expanded slightly as it delivered more loss-making new engines to Boeing Co. and Airbus SE.

“We’ll see that I think again in the second half, but I think all very much in line with the construct for the year,” Culp said.

Sales at GE Renewable Energy grew 27% organically, helped higher equipment deliveries at its wind turbine and grid businesses. Orders more than doubled to $8.3 billion as federal incentives for onshore wind projects included in the Inflation Reduction Act supported demand. The business lost $359 on an operating basis — a modest improvement from a year ago — amid an ongoing turnaround of GE’s onshore wind turbine business.

“Onshore wind really is the battleground for us in turning renewables and then preparing Vernova for launch, and we think we’re winning that one right now,” he said.