General Electric Earnings Offer Relief After Restatements

General Electric followed last week’s restatement of 2016 and 2017 earnings with first quarter earnings that came in better than already dialed down expectations giving relief to $GE shares. Aviation was the stand out, power the lagard.

General Electric followed last week’s restatement of 2016 and 2017 earnings with first quarter earnings that came in better than already dialed down expectations giving relief to $GE shares. Aviation was the stand out, power the lagard

GE CEO FlanneryNew GE CEO Flannery Putting his own stamp on the company

Earnings:

$GE reported a net loss of 14 cents a share, worse than  the loss of a 1 cent a share a year ago. On continuing basis net income was 4 cents a share, up from 1 cent a share year ago. On an adjusted basis, GE earned 16 cents a share, higher than the 11 cents expected by anaysts surveyed by Thomson Reuters. Revenue rose 7 percent to $28.66 billion, higher than the expected $27.45 billion.

General Electric Co NYSE: $GE

Reaction · April 20, 10:58 AM EDT 14.63 ▲ 0.64 (4.57%)

Segments:

  • Aviation revenue grew 7%
  • Health care revenue grew 9%.
  • Power revenue fell 9%, profit down 38% on year
  • Oil and gas revenues grew 74% but all attributable to acquisitions, organic growth was negative territory with. profit down 30% on year

“The first quarter is a step forward in executing on our 2018 plan and we are seeing signs of progress in our performance. Industrial earnings, free cash flow, and margins all improved year over year. We reduced Industrial structural costs by $805 million and are on track to exceed our cost reduction goal of $2 billion in 2018.” Chairman and CEO John Flannery said in a statement

 General Electric earnings infographic

Outlook:

GE maintained its full-year EPS outlook which surprised many analysts GE sees EPS toward the lower end of its range.

Justice Department v GE Capital

GE recorded reserves of $1.5 billion for potential liabilities from the Justice Department investigation in connection with alleged subprime mortgage violations for GE Capital’s now defunct WMC mortgage business.

Chief Financial Officer Jamie Miller on the $GE conference call said that the new reserve is based on settlement discussions GE held with the Department of Justice last month, as well as the precedent set by previous settlements by other banks. Deutsche Bank had estimated GE had $426 million set aside, while Bank of America said its model assumes about “$1 billion of cash outflow to settle” the WMC claims.

2016-2017 Restatement

GE booked a $4.2 billion charge, restating earnings as expected and reduced EPS over the last two years by $0.30 The update follows its January 1 adoption of a new and required accounting standard, which affects how public companies recognize revenue from customer contracts.

$GE has previously estimated 2016 EPS would be lower by 13 cents and 2017 EPS would be lower by 16 cents after adopting the new standard. The restatement follows two a proxy battle that recommended GE shareholders reject longtime auditor KPMG on independence and performance. The earnings restatement was due by the ides of March however GE said it was taking longer than expected to determine the final number, not a positive sign. 

The company said the new accounting standard won’t affect 2018 EPS guidance of $1-$1.0

General Electric shares lost over 3% keeping $GE as the Dow’s worst performer of the year to date, being down 25.2% so far in 2018. GE earlier last week announced it will sell part of its health care IT business to Veritas Capital for $1.05 billion. GE’s health care business had sales of about $19 billion last year, and the portion sold includes only the health care staffing and payroll services software. 

Source: GE, AlphaStreet, TradersCommunity

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