Huge Slump in General Electric’s Q2 Earnings Drags Stock by 4.4%



GE’s second-quarter earnings

General Electric (GE) announced its second-quarter results today before the market opened. The company’s net earnings fell 32.7% to $1.62 billion in the quarter from $2.41 billion in Q2 2017. The GAAP EPS declined 43% year-over-year to $0.08 in Q2 2018 from $0.14 in Q2 2017.

However, the company’s second-quarter adjusted EPS of $0.19 beat Thomson Reuters–surveyed analysts’ estimate of $0.17 by ~8%. But they fell 10% year-over-year from $0.21 in Q2 2017. Markets had high expectations for the beleaguered industrial (IYJ) giant’s second-quarter earnings. A huge fall in the company’s net earnings sent shockwaves across the markets, badly hitting the stock. GE kept its full-year 2018 adjusted EPS guidance of $1.0–$1.07 unaltered.

Today, GE stock opened at $13.72, which was almost equal to July 19’s closing price. From that level, the company’s shares slightly rose to $13.78 only to witness a freefall in the morning hours. By noon, the stock slumped over 4.3%, touching $13.12.

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Major aspects of second-quarter results

General Electric reported revenue of $30.1 billion in the second quarter, beating analysts’ estimate of $29.3 billion by 2.7%. Revenue was up 3% year-over-year from $29.0 billion in Q2 2017. However, the company’s Industrial segment’s organic revenue declined 6% to $25.2 billion in the second quarter from $26.9 billion a year ago.

Weakness in the Power segment dragged the Industrial division’s revenue down and hurt GE’s overall results. Second-quarter revenue was up in the Oil & Gas, Aviation, and Healthcare segments. However, it was down in the Power, Renewable Energy, Transportation, and Lighting verticals.

GE Capital’s continuing operations generated a 20% bigger loss, amounting to $207.0 million in the second quarter. GE’s Industrial segment’s adjusted income declined 11% year-over-year to $2.9 billion in the second quarter from $3.2 billion in the corresponding quarter of 2017. On an adjusted basis, the Industrial segment’s margins contracted by 160 basis points to 10.4% in Q2 2018 from 12% in the second quarter last year.

Peer earnings

Honeywell International (HON) also announced its second-quarter earnings today. The company reported EPS of $1.68, down 6.7% from $1.80 in the second quarter last year. United Technologies (UTX) and 3M Company (MMM) are slated to report their second-quarter earnings on July 24.


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