Will Supply-Chain Woes Mar General Electric's (GE) Q3 Earnings?

General Electric Company GE is scheduled to report third-quarter 2022 results on Oct 25, before market open.

The Zacks Consensus Estimate for the company’s third-quarter earnings has been revised downward by 7.8% in the past 60 days. However, the company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 43.9%.

Let’s see how things are shaping up for General Electric this earnings season.

General Electric Company Price and EPS Surprise

General Electric Company price-eps-surprise | General Electric Company Quote

Factors to Note

Continued recovery in the commercial market is likely to have driven performance of the Aerospace segment. Growth in commercial services and strength in spare parts sales are expected to reflect in segmental revenues. The Zacks Consensus Estimate for Aerospace revenues in the third quarter indicates a 21.6% jump from the year-ago reported number.

The Healthcare segment is expected to have benefited from higher Imaging, Ultrasound and HTS services sales and strong order demand. The consensus mark for Healthcare revenues in the third quarter suggests a 6.4% rise from the year-ago reported number.

However, low shipment volumes might have dented performance of the Power segment. Weak demand in the onshore wind unit and continued pressure from onshore North American market is expected to have weighed on the Renewable Energy segment’s revenues in the third quarter.

Supply chain disruptions, including labor and material shortages and high logistics costs, are likely to have dampened GE’s third-quarter performance. Given the company’s substantial international exposure, foreign currency headwinds might have impeded its performance in the to-be-reported quarter.

What Does the Zacks Model Say?

Our proven model does not conclusively predict an earnings beat for General Electric this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates, which is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: General Electric has an Earnings ESP of -9.45% as the Most Accurate Estimate is pegged at 42 cents, lower than the Zacks Consensus Estimate of 47 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: General Electric currently carries a Zacks Rank #3.

Highlights of Q2 Earnings

General Electric’s second-quarter 2022 adjusted earnings of 78 cents per share beat the Zacks Consensus Estimate of 38 cents. The bottom line jumped 95% year over year. Consolidated revenues of $18,646 million surpassed the Zacks Consensus Estimate of $18,001 million. The top line inched up 2% year over year, driven by the strong performance of the Healthcare and Aerospace segments, partly offset by weakness in the Power and Renewable Energy segments.

Stocks to Consider

Here are some companies that you may want to consider as, according to our model, these have the right combination of elements to beat on earnings this reporting cycle.

Illinois Tool Works ITW has an Earnings ESP of +0.38% and a Zacks Rank #3. The company is slated to release third-quarter 2022 results on Oct 25.

Illinois Tool’s earnings have surpassed the Zacks Consensus Estimate in three of the preceding four quarters, while missing in one. The average beat was 2.8%.

Emerson Electric Co. EMR has an Earnings ESP of +0.81% and a Zacks Rank #3. The company is scheduled to release fourth-quarter fiscal 2022 (ended Sep 30, 2022) results on Nov 2.

Emerson’s earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 6%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
 

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.