GE’s forecast misses estimates ahead of historic breakup

General Electric Co. predicts profit will fall short of Wall Street’s expectations in its final quarter ahead of a long-planned breakup.

Adjusted earnings will be 60 to 65 cents a share in the first three months of the year, GE said Tuesday in a statement that also detailed fourth-quarter results. That missed the 70-cent average of analyst estimates compiled by Bloomberg.

GE’s “subdued” quarterly forecast and 2024 aerospace guidance with implied margins close to flat “could be viewed as underwhelming,” Barclays analyst Julian Mitchell said in a note.

While GE’s fourth-quarter results beat expectations, the outlook offered an uneven end to GE’s days as a conglomerate, as the 135-year-old company prepares to break up in early April. After spinning off its health-care operations in 2022, GE will separate the aerospace and energy businesses into standalone entities, culminating Chief Executive Officer Larry Culp’s multiyear effort to rescue the fallen manufacturing icon.

Its shares fell 1.4% as of 8:49 a.m. Tuesday before the start of regular trading in New York, paring a decline of as much as 10%. GE’s stock has soared 69% over the last 12 months, far outpacing the S&P 500 Index’s gain of roughly 22% in the same period.

Fourth-quarter 2023 free cash flow — a key measure for investors — was about $3 billion, slightly ahead of the $2.9 billion average of analyst estimates. Adjusted earnings were $1.03 per share in the period, more than the 91 cents expected by Wall Street.

The quarter was “a very strong finish to an excellent year,” Culp said in an interview.

That sentiment was echoed by Citi analyst Andrew Kaplowitz, who said in a note that the results “highlight ongoing momentum” ahead of the breakup, despite the soft first-quarter guidance.

Aerospace Profit

GE Aerospace should produce as much as $6.5 billion in operating profit this year, even as the world’s largest jet-engine maker takes on about $600 million in costs as it becomes an independent company. That compares to about $6.1 billion in operating profit generated by the jet-engine division in 2023.

The company expects GE Aerospace to generate more than $5 billion in free cash flow and adjusted revenue growth of low-double digits or more.

The GE Vernova energy businesses this year should see as much as $35 billion in revenue and adjusted earnings before interest, taxes, depreciation and amortization margin in the mid-single-digit range. Free cash flow at the business should be $700 million to $1.1 billion, it said.

“I’ve never been more confident in the path ahead,” Culp said on a conference call with analysts.