GE Guides to Low End of Outlook on Inflation, Supply Chain Woes
Shares of General Electric Co. fell more than 10% April 26 after the company’s leaders said they expect the conglomerate’s 2022 profits to be at the low end of their guidance range because of continued cost and supply chain pressures.
Boston-based General Electric posted a net loss of a little more than $1 billion in the first quarter on revenues of $17.0 billion as equipment sales slipped 14% in part because of snarled supply chains. Adjusted for several one-time items, profits rose 19% from early 2021, with aviation work growing strongly and expanding its margins while the performance of GE’s healthcare and renewable energy groups was worse than in the prior-year period. The latter posted a segment loss of $434 million as customers delayed orders in the face of strong inflation and the U.S. onshore wind market shrank as stakeholders wait for clarity on the future of a production tax credit.
The company also booked a $200 million pre-tax charge to account for the impact on its businesses, primarily aviation and power, of Russia’s invasion of Ukraine and incurred $100 million in costs related to planning work for its separation into three companies.
CEO Larry Culp told analysts and investors on a conference call that GE faced “increasing challenges” during the first three months of the year. Supplier disruptions cost the company about 6 percentage points of sales growth in the quarter and look like they will endure long enough to push some business into 2023. Because of that, Culp and CFO Caroline Dybeck Happe said GE’s adjusted earnings per share are trending toward being closer to the floor of the $2.80-$3.50 outlook they gave in late January.
Culp said the company’s renewables unit leaders are digging into cost controls and cuts as they adjust to the market and carry out GE’s strategy of being more picky about the segments in which it competes. More broadly, he added, demand is not a major concern—today’s pressures, he said, are “clearly a throughput dynamic”—and GE teams are continuing to work at their own plants and with suppliers to improve workflows.
“There is a lot that we can control,” Culp added.
Heading into the lunch hour April 26, GE shares (Ticker: GE) were changing hands around $79.60 after closing at $89.88 the day before. Year to date, they are now down nearly 20%.
