General Electric (NYSE: GE) is scheduled to report its Q3 2023 results on Tuesday, October 24. We expect GE stock to rise post-Q3 results, with revenue and earnings marginally beating the consensus estimate. GE’s Aerospace business should benefit from a continued rise in travel demand. Our interactive dashboard analysis of General Electric’s Earnings Preview has additional details. So, what are some trends likely to drive General Electric’s results, and how has the company’s stock performed?
GE stock has seen extremely strong gains of 70% from levels of $65 in early January 2021 to around $110 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. However, the increase in GE stock has been far from consistent. Returns for the stock were 10% in 2021, -11% in 2022, and 64% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 13% in 2023 (YTD) – indicating that GE underperformed the S&P in 2021.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the industrial sector, including UPS, CAT, and UNP, and even for the mega-cap stars GOOG, TSLA, and MSFT.
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In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could GE face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump? Our forecast indicates that GE stock has room for growth, as discussed below.
(1) Aerospace To Drive Top-Line Growth
- Trefis estimates GE’s Q3 2023 revenues to be around $15.8 billion, slightly above the $15.7 billion consensus estimate.
- GE’s aviation business will likely drive sales growth with more engine deliveries and increased service demand.
- The company’s transactional services at Gas Power have seen strong growth in recent quarters, a trend expected to continue in the near term.
- Also, the Renewable Energy business should benefit from increased grid and wind equipment deliveries.
- Looking at Q2, GE reported an 18% rise in total revenue to $16.7 billion, primarily led by the Aerospace business, up 28% y-o-y, while Renewable Energy was up 24%, partly offset by a 1% fall in Power revenues.
- Our General Electric’s Revenues dashboard offers more details on the company’s segments.
(2) Higher Costs To Weigh On Bottom Line Growth
- GE’s Q3 2023 adjusted earnings per share (EPS) is expected to be $0.58 per Trefis analysis, marginally above the $0.56 consensus estimate.
- GE’s adjusted net income of $748 million in Q2 2023 reflected a 91% surge compared to the $391 million figure seen in the prior year quarter. This can be attributed to a 120 bps rise in adjusted profit margin.
- We estimate full-year 2023 adjusted EPS to be $2.39, compared to $2.62 in 2022.
(3) GE Stock Has Room For Growth
- We estimate General Electric’s Valuation to be $126 per share, reflecting a 17% upside from the current levels of $108.
- GE stock also stands to benefit from its focus on reducing its debt. GE’s current debt of around $22 billion compares with a significant $94 billion figure in 2019. The company has sold several of its assets to reduce its debt.
- GE will split off its energy and power business early 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.
|S&P 500 Return||1%||12%||93%|
|Trefis Reinforced Value Portfolio||0%||23%||533%|
 Month-to-date and year-to-date as of 10/19/2023
 Cumulative total returns since the end of 2016