Will General Electric Stock Rise Post Q4?

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General Electric

General Electric (NYSE: GE) is scheduled to report its Q4 2022 results on Tuesday, January 24. We expect GE stock to post mixed results, with revenue falling short but earnings above the consensus estimate. GE’s Aerospace business should benefit from a continued rise in travel demand. The company completed the spinoff of its healthcare business earlier this month. GE Healthcare is now listed on NASDAQ (GEHC), and GE owns close to a 20% stake in the healthcare arm. GE has already released preliminary Q4 results for its healthcare business, with sales rising 7% y-o-y to $4.9 billion and 2023 revenue growth projected to be between 5 and 7%. Looking at GE stock, it has more room for growth, as discussed below. Our interactive dashboard analysis of General Electric’s Earnings Preview has additional details.

(1) Revenues expected to be below the consensus estimates

  • Trefis estimates GE’s Q4 2022 revenues to be around $20.6 billion, reflecting 1.5% growth from the prior year’s quarter but below the $21.6 billion consensus estimate.
  • While GE’s aviation business had been a drag on its revenue growth in 2020 and 2021, it has seen a rebound over the recent quarters. While this trend is expected to continue, material and labor shortages may hamper near-term growth.
  • Looking at Q3, GE reported a 3% rise in total revenue to $19.1 billion, primarily led by the Aerospace business, up 24% y-o-y, while Healthcare was up 6%, partly offset by a 15% fall in Renewable Energy and a 12% decline in Power revenues.
  • Our General Electric’s Revenues dashboard offers more details on the company’s segments.

(2) EPS likely to be above the consensus estimates

  • GE’s Q4 2022 adjusted earnings per share (EPS) is expected to be $1,24 per Trefis analysis, well above the $1.13 consensus estimate.
  • GE’s adjusted net income of $1.1 billion in Q3 2022 reflected a 19% fall compared to the $1.3 billion figure seen in the prior year quarter. This can be attributed to a 190 bps fall in adjusted profit margin.
  • We estimate full-year 2022 EPS to be $2.61, compared to $2.11 in 2021.
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(3) GE stock has more room for growth

  • We estimate General Electric’s Valuation to be $92 per share, reflecting a 16% upside from the current levels of $79.
  • GE stock also stands to benefit from its focus on reducing its debt. GE’s current debt of around $38 billion compares with a significant $110 billion figure in 2018. The company has sold several of its assets to reduce its debt.
  • GE will split off its energy business next year, unlocking more shareholder value.

While GE stock looks like it has more room for growth, it is helpful to see how General Electric’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Honeywell vs. Amkor Technology.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 GE Return 21% 21% -55%
 S&P 500 Return 2% 2% 75%
 Trefis Multi-Strategy Portfolio 7% 7% 237%

[1] Month-to-date and year-to-date as of 1/19/2023
[2] Cumulative total returns since the end of 2016

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