Is GE Likely To Have Beat Earnings Expectations For FY19?

by Trefis Team
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General Electric (NYSE:GE) will release its Q4 and full-year 2019 results on Wednesday, January 29. We believe that General Electric will miss Revenue as well as Earning expectations. We expect GE to report revenues of $93.4 billion (vs. consensus estimate of $93.7 billion), which would be 23.2% lower than the previous year. Earnings are likely to be around $0.45 (vs. consensus estimate of $0.61), which are well above the -$(2.43) reported in 2018, thanks to an improvement in margin. Despite the weaker-than-expected performance for FY 2019, we believe that the significant increase in earnings year-on-year will very likely result in a positive movement in GE’s stock price once it announces earnings. Our forecast indicates that GE’s Valuation is $12 per share, which is slightly higher than its current market price of roughly $11.

A] Revenue Expected To Come In Below Consensus

  • Total revenues have increased from $119.5 billion in 2016 to $121.6 billion in 2018.
  • Trefis estimates GE’s revenues to have declined by 23% to $93.4 billion in 2019.
  • The decline can be attributed to the deconsolidation of the Oil & Gas segment (which resulted in a one-time loss of $8.7 Billion), as well as the disposal of the Transportation segment.

A separate interactive dashboard for GE provides an in-depth view of GE’s revenue trend and segment-wise revenue performance, along with forecast for 2020.

B] EPS To Be Lower Than Expected

  • Trefis expects GE’s 2019 earnings per share (EPS) to be $0.45 – lower than the consensus estimate of $0.61 per share.
  • A more substantial reduction in Total Expenses compared to Revenues coupled with a lower share count will drive EPS to increase compared to 2018.
  • As we forecast GE’s Revenues to decline at a slower rate than Expenses in 2019 (23% vs. 37%), this will result in a substantial increase in GE’s Net Income Margin figure from -17% in 2018 to 3.9% in 2019.

 

C] Stock Price Estimate Higher than Market Price

  • A trailing P/E multiple of 25.8x looks appropriate for GE’s stock, which is higher than the current implied P/E multiple of 18.6x.
  • As per Trefis, GE’s 2019 earnings will be lower than market expectations at $0.45.
  • This forecast works out to a fair value of $12 for GE’s stock, which is slightly higher to its current market price of around $11.

Additionally, you can input your estimates for GE’s key metrics in our interactive dashboard for GE’s pre-earnings, and see how that will affect the company’s stock price.

 

See all Trefis Price Estimates and Download Trefis Data here

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