Fourth-quarter EPS to fall
General Electric (GE) is scheduled to report its fourth-quarter earnings results on January 31. Analysts expect its bottom line results to fall YoY (year-over-year) mainly due to the underperformances of several of its segments.
Wall Street analysts expect GE to report adjusted EPS of $0.22, down 18.5% from its EPS of $0.27 in the fourth quarter of the previous year. The industrial conglomerate’s earnings fell more than 20% in the first three quarters of 2018.
Underperforming businesses to hurt revenue
GE’s revenue for the quarter is expected to rise just 3.8% YoY to $32.59 billion. Analysts believe the Aviation and Renewable Energy segments will see strong top line growth, but continued weakness in the Power, Lighting, and Transportation segments could weigh on the company’s overall revenue growth.
The Power segment has been struggling for the past several quarters as growing demand for renewables and energy-efficient alternatives has eroded the need for fossil fuel–based power plants.
Intense competition and train budgetary cuts in several countries are hurting the Transportation segment’s revenue and margins. The company’s Lighting segment’s sales have also been hurt by intensified competition from local and regional players.
The sluggish performances of the businesses mentioned above have been weighing on GE’s overall revenue and profitability growth. The industrial conglomerate’s third-quarter revenue performance was more disappointing than the performances of most of its competitors in the industrial sector (XLI).
The company’s third-quarter revenue fell 4% YoY to $29.6 billion and missed analysts’ consensus expectation of $29.9 billion in the period. On the other hand, its main competitors Honeywell International (HON), United Technologies (UTX), and Crane Company (CR) all reported better-than-expected revenues and marked improvements YoY.
Focus on restructuring initiative progress
Apart from the company’s fourth-quarter earnings results, investors and analysts are likely to focus on its management’s discussion about the progress of its ongoing restructuring plan. CEO Larry Culp has sped up the planned restructuring initiative the company undertook in June last year, helping it to gain investors’ confidence over the last month.
In the last few weeks, Culp has also revised several divestments and spin-off deals, including a deal with Baker Hughes, a GE company (BHGE), and Wabtec, which promises higher cash flows for the company. He has also been able to sell $1.5 billion worth of GE Capital’s healthcare equipment finance portfolio and has confidentially filed for an IPO for GE’s Healthcare unit.