How Will General Electric Stock Trend Following Q3 Earnings?

GE: General Electric logo
General Electric

General Electric (NYSE:GE) is scheduled to report its Q3 2021 results on Tuesday, October 26. We expect the company to report revenues and earnings above the consensus estimates, driven by a rebound in the overall economic activity, as global Covid-19 vaccination rates continue to rise. We expect the company to navigate well based on the economic recovery  over the latest quarter. Not only do we expect an earnings surprise, our forecast indicates that GE’s valuation is $117 per share, which is 11% above the current market price of $105, implying that the stock has more room for growth, in our view. Our interactive dashboard analysis on General Electric’s Pre-Earnings has additional details.

(1) Revenues expected to be above the consensus estimates

Trefis estimates GE’s Q3 2021 revenues to be around $19.4 billion, slightly above the $19.3 billion consensus estimate. While GE’s aviation business has been a drag on its revenue growth in the recent past, given the impact of the pandemic on the overall sector, the aviation sales are expected to rebound now with economies opening up gradually, and airplane manufacturers planning to increase production. In fact, aviation revenues were up 10% in Q2, and they are expected to trend higher in Q3 as well, but remain lower when compared to pre-pandemic levels.

Relevant Articles
  1. Should You Buy General Electric Stock At $65?
  2. Forecast Of The Day: General Electric Aviation Revenues
  3. What’s Happening With General Electric Stock?
  4. This Industrial Company Is A Better Bet Over General Electric Stock
  5. Company Of The Day: General Electric
  6. How Will General Electric Stock Trend Following Q4 Earnings?

The company’s healthcare business has seen a rise in demand of late, with a rebound in total procedures volume, a trend expected to continue going forward. Furthermore, the company’s recent acquisition of BK Medical strengthens the ultrasound portfolio of its healthcare business over the coming years.

Furthermore, the economic growth has picked up pace and GE’s other businesses, including Power and Renewable Energy, are expected to see strong revenue growth. Our dashboard on General Electric’s Revenues offers more details on the company’s segments.

2) EPS likely to be above the consensus estimates

GE’s Q3 2021 adjusted earnings per share (EPS) is expected to be $0.52 per Trefis analysis, compared to $0.43 consensus estimate. GE’s adjusted net income of $0.4 billion in Q2 2021 was much better than a net loss of $1.2 billion in the prior-year quarter. This can be attributed to higher revenues as well as margin expansion. That said, the company cautioned about rising material costs, and this likely weighed on the overall earnings growth in Q3. Looking forward, as the company sees its sales rebound, especially the aviation segment, the margins are expected to rise. As such, for the full-year, we expect the adjusted EPS to be higher at $2.15 compared to $0.10 in 2020.

(3) Stock price estimate above the current market price

Going by our General Electric’s Valuation, with an EPS estimate of around $2.15 and a P/E multiple of around 54x in 2021, this translates into a price of $117, which is 11% above the current market price of around $105. Other than a Covid-19 recovery play, GE stock also stands to benefit from its focus on reducing its debt. GE’s current debt of around $75 billion compares with a large $110 billion figure seen in 2018. The company has sold several of its assets to reduce its debt, and it continues to be on that path. As such, we believe that GE stock has more room for growth in the near term.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

While GE stock may have more room to grow, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Honeywell vs Roper.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since 2016.

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates