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General Electric’s 1Q18 Earnings Beat Estimates

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GE’s 1Q18 earnings

General Electric (GE) released its 1Q18 earnings on April 20. On an adjusted basis, the company’s earnings per share (or EPS) came in at $0.16, up 14.0% YoY (year-over-year) from the restated $0.14 in 1Q17. GE surpassed Thomson Reuters–surveyed analysts’ adjusted EPS target of $0.11 by a whopping 41.3%.

GE’s adjusted earnings take into account total continuing operations excluding industrial gains, restructuring, and non-operating pension and benefit costs. The company’s reported EPS reached -$0.14 in 1Q18 and took a $1.5 billion hit in the form of a reserve creation. This was associated with the US Department of Justice’s investigation into GE’s erstwhile WMC mortgage business.

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GE’s stock price reaction

Given GE’s aggressive cost-cutting measures in its Power segment, markets were expecting better quarterly results from the company. On April 19, GE stock closed at $13.99. On its earnings day, its stock rose 7.0% in early trading. However, it closed at $14.54, which was an ~4.0% decrease based on its April 19 closing price.

Since January 2018, General Electric stock has declined 16.7%. In the last year, the industrial conglomerate’s stock price has lost 50.0% of its value. Let’s see how the stock prices of GE’s peer group companies reacted to its 1Q18 earnings on April 20.

  • Honeywell International (HON): up 1.5%
  • 3M (MMM): down 0.5%
  • United Technologies (UTX): down 0.62%
  • Textron (TXT): up 0.16%
  • Boeing (BA): down 0.57%
  • Illinois Tool Works (ITW): down 0.5%

On the same day, the SPDR S&P 500 Trust ETF (SPY), an indicator of the broader market, declined 0.84%.

Management’s thoughts on 1Q18 earnings

During its 1Q18 earnings call, GE reaffirmed its adjusted EPS outlook of $1.00–$1.07 for fiscal 2018. The company’s chairman and CEO, John Flannery, said, “The first quarter is a step forward in executing on our 2018 plan, and we are seeing signs of progress in our performance.” 

Flannery added, “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.”

In this 1Q18 post-earnings series, we’ll look at GE’s segmental performance. We’ll also examine analysts’ views on GE and its peers after its 1Q18 results.

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