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Key points to remember
- Adjusted EPS was $0.08 versus analysts’ expectation of $0.09.
- Revenues met analysts’ expectations.
- Revenues from renewables were below the level estimated by analysts.
- GE has secured the first order for its Haliade-X offshore wind turbine.
What happened
GE reported adjusted EPS for the fourth quarter of fiscal 2020 that beat analysts’ expectations and was down from the year-ago quarter. Revenue was in line with analysts’ forecasts but was also down from the same quarter a year ago. The company’s revenue from its renewable energy segment came in below estimates.
(Below is the original Earnings Snapshot from Investopedia, published January 21, 2021.)
What to look for
General Electric Co. (GE) has been hampered by a series of sharp quarterly declines in earnings due to the fallout from the COVID-19 pandemic. The virus hit when GE was already in the midst of a major turnaround effort after years of crisis, selling off several core businesses and betting much of its future on the aerospace industry. But air travel has been decimated by the pandemic.And GE’s aviation unit, typically its most profitable business, has been hammered.
Investors will focus on whether GE’s financial results show some improvement when the company reports its results on January 26, 2021 for the fourth quarter of fiscal 2020.The news may not be good. Analysts expect a continued sharp decline in adjusted earnings per share (PES), although these declines may be less severe than in recent quarters.
Investors will also focus on revenue from GE’s renewable energy unit, a key business that has seen strong growth in recent years. He is also set to benefit from the Biden administration’s implementation of a series of major initiatives to combat climate change. In the near term, analysts believe GE’s renewables revenue will stagnate in the fourth quarter of fiscal 2020, showing virtually no growth.
Shares of GE have lagged the market over the past year. Prior to the pandemic-induced stock market crash in early 2020, GE had outperformed. The stock initially rebounded with the market in late March, but then retreated, hitting a low for the year in mid-May. It was only towards the end of September that the stock started to make a sustained comeback and narrowed the performance gap considerably. GE shares have provided a total return of -1.8% over the past 12 months, well below the S&P 500 total return of 16.0%.
Source: Trading View.
Shares of the company continued their upward trend after its third quarter fiscal 2020 earnings report. While adjusted EPS plunged 60.2% from the prior year quarter, Positive earnings are an improvement over the loss recorded in the previous quarter. Revenue fell 16.9%, marking the ninth consecutive quarter of year-on-year declines. GE said the pandemic has inflicted the most damage on its Aviation segment and its aircraft leasing business within its Capital segment.
GE’s results in the second quarter of fiscal 2020 were a low point, which weighed on its stock. The company posted an adjusted loss per share of $0.15, its first loss in at least 15 quarters. Revenue fell 24.2%, the biggest drop in at least 14 quarters. The Aviation Unit, which produces jet engines for Boeing Co. (BA) and Airbus SE (EADSY), also recorded a loss. The unit had to cut jobs amid plummeting orders.
Analysts expect further declines in the fourth quarter of fiscal 2020. Adjusted EPS is expected to fall 55.3% year-on-year, a significant drop but not as severe as the prior quarter. Revenue is expected to fall 16.4%, making it the tenth consecutive quarter of year-over-year declines. For fiscal 2020, adjusted EPS is expected to fall 93.5%, its biggest annual decline in at least five years. Annual revenue is expected to decrease by 16.4%.
| GE Key Metrics | |||
|---|---|---|---|
| Estimate for the fourth quarter of fiscal 2020 | Q4 2019 | Q4 2018 | |
| Adjusted earnings per share ($) | 0.09 | 0.21 | 0.14 |
| Revenue ($B) | 21.9 | 26.2 | 26.5 |
| Renewable Energy Revenues ($B) | 4.8 | 4.7 | 4.6 |
Source: visible alpha
As mentioned above, investors will also focus on revenue generated from GE’s renewable energy business, which includes wind, hydro, solar and other renewable energy solutions.GE has focused more on its renewable energy business in recent years as it discontinued legacy units, including its light bulb business, which was created by legendary GE founder and inventor Thomas Edison. over 130 years ago. The company is undertaking ambitious plans to become a leader in renewable energy. Its prototype for a new offshore wind turbine, called Haliade-X, is the largest in the world.
GE’s renewable energy business has grown significantly in recent years, with annual revenue growing from approximately $9.8 billion in fiscal year 2016 to $15.3 billion in fiscal year 2019. However, revenue growth has slowed significantly in recent quarters due to the pandemic. Renewables revenue rose 2.3% in the third quarter of fiscal 2020 after declining 3.4% in the second quarter of fiscal 2020. Analysts expect it to rise only only 0.1% in the fourth quarter of fiscal 2020 and only 4.2% for the whole of fiscal 2020. This would be the slowest pace since fiscal 2017. The rebound in GE’s renewable energy business may depend heavily on two factors: how quickly the economy recovers and whether initiatives of President Biden on climate change are accelerating the growth in demand for renewable energy.
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