GE earnings: Stocks rebounded as earnings estimates fell. Will investors or analysts be right this time?
General Electric Co. is expected to release its first quarter results ahead of Tuesday’s opening bell, and there are concerns that investors may be disappointed, given that the industrial conglomerate’s shares rose even as analysts’ expectations fell.
A similar dynamic had occurred ahead of GE’s long-awaited Investor Day on March 10, as GE stock,
fell 12.4% in two days as the company announced a $ 30 billion deal to combine its aircraft leasing business with AerCap Holdings NV AER,
and provided advice that was largely in line with expectations. Some analysts suggested that the post-investor day’s sell-off was the result of investors being overly bullish as the stock rose 30% in the year leading up to the meeting and closed at a nearly 3-year summit two days before the meeting. .
Since the industrial conglomerate released its fourth quarter results on Jan. 26, the FactSet consensus for earnings per share (EPS) has fallen 67% and for revenue has fallen 5.1%, with estimates for three of GE’s four business units down. At the same time, the outlook for industrial free cash flow (FCF) is now more than four times more negative than three months ago.
And yet, GE’s stock, which rose 1.1% on Monday afternoon, has climbed 28.3% since late January. In comparison, the XLI SPDR Industrial Select Sector exchange-traded fund,
has risen 19.7% since the end of January and the S&P 500 SPX index,
As an example of the difference between earnings and equity outlook, UBS analyst Markus Mittermaier recently raised his share price target to $ 17 from $ 15, citing an acceleration in the transformation. into a “simpler” company, but reduced its first quarter EPS. estimate to 2 cents from 3 cents, and reduced its 2021 outlook to 26 cents from 29 cents.
Earnings: The average estimate of the 17 analysts polled by FactSet is adjusted EPS of one cent per share in the first quarter, compared to 5 cents a year ago. On January 29, the FactSet EPS consensus was 3 cents.
Estimize, a crowdsourcing platform that brings together estimates from buying analysts, hedge fund managers, business executives, academics and others, has a much higher EPS estimate of 4 cents.
Returned: FactSet consensus for revenue is $ 17.59 billion, up from $ 20.52 billion a year ago. Consensus has fallen by nearly $ 1 billion, from an estimate of $ 18.54 billion as of Jan. 29. The consensus on Estimize revenue is $ 17.93 billion.
For GE’s business segments, Aviation FactSet revenue consensus fell to $ 5.28 billion from $ 5.39 billion on Jan. 29, declined for Power to $ 4.00 billion dollars from $ 4.16 billion and slipped for health to $ 4.09 billion, from $ 4.10 billion. The estimate rose for renewable energy to $ 3.26 billion, from $ 3.22 billion.
Industrial free cash flow: The FCF’s average estimate, from the two analysts who provided estimates to FactSet, is now less than $ 1.21 billion, with a range of minus $ 870.0 million to less than $ 1.55 billion. dollars. On January 29, the range was $ 747.0 million negative to $ 216.0 million positive.
• GE stock has rebounded from the last two earnings reports, averaging 3.6%, after falling 3.8% on average after the previous two earnings reports. In the last 10 earnings reports, the stock has gained six times, for an average gain of 7.5%, and has fallen 4.3% on average after the other four reports.
• Options traders braced for a smaller-than-usual stock market move after GE’s earnings report. An options strategy known as a straddle, which is designed for the buyer of the straddle to make money if the stock moves, one way or the other, more than the straddle price does. implies, was valued for a movement of 67 cents on Tuesday, the data showed. provided by Option Research & Technology Services (ORATS). This compares to the average price change over the past 12 quarters of 80 cents, ORATS said. Based on current prices, a straddling long would make money if the stock moved 4.9% in either direction. Learn more about overlaps.
• Since the end of January, the percentage of Wall Street analysts surveyed by FactSet with equivalent buy ratings has fallen from 68% to 60%, while the percentage of analysts with hold ratings has increased by 32 % to 40%. No analyst has the equivalent of sell quotes on GE shares.
• the BKR share of Baker Hughes Co.,
closed the first quarter at $ 21.61, an increase of $ 11.11, or 105.8%, from the same quarter a year ago. GE said in its fourth quarter earnings report that it has a 30.1% stake in Baker Hughes. As of April 16, Baker Hughes said he had a total of 1.04 billion Class A and Class B shares outstanding, meaning that GE held approximately 313.5 million shares of Baker Hughes at the end of January. A price gain of $ 11.11 on that number of shares would equate to roughly $ 3.5 billion. Last year, GE recorded a loss of $ 4.6 billion on its stake in Baker Hughes.