What To Expect From General Electric’s Q2 Earnings?

by Trefis Team
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General Electric (NYSE: GE) will report its Q2 earnings on July 21. We expect a mid single-digit decline in its revenues driven by weakness in the oil & gas market and non-repetition of grid orders from Q2’16. Oil prices have yet again declined, which does not bode well for GE’s oil & gas revenues and profits. GE’s profits, however, could grow moderately this quarter as GE Aviation has been performing strongly of late, which we expect that to continue this quarter as well. The organic growth in GE Power and Renewable Energy is also likely to drive earnings for GE this quarter.

Overall Revenues May Decline This Quarter

In Q2, GE’s overall revenues grew by nearly 15%, primarily due to the acquisition of Alstom’s energy business, despite a 22% decline in its oil & gas revenues. Crude oil prices in Q2’17 remained at similar levels to Q2’16, which implies that GE’s oil & gas revenue decline could be lower than its Q2’16 decline. However, OPEC’s decision to cap production could lead to a decline in rig counts and activity in the North American onshore market.

Profits May Grow Moderately

We expect GE’s profits to grow moderately this quarter driven by high profits from the Power, Renewable Energy, and Aviation segments. The aviation market is growing at near double-digit rates due to growth in freight volumes and global revenue passenger miles. The reliability and performance of GE’s LEAP engines have also been driving  Aviation revenues. Additionally, both Power and Renewables have shown strong organic growth in the last couple of quarters and we expect that to continue this quarter. We expect this to offset any potential softness in the Oil & Gas business, and expect modest earnings growth this quarter.

For our model and valuation, please refer to our complete analysis of General Electric

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