GE Q1 FY2022 Earnings Insight: Aviation Revenue Recovery and Market Outlook

Spotlight on GE's Aviation Segment Revenue

Essential Highlights

• Forecasted adjusted EPS is $0.18, down from $0.23 in Q1 FY2021.
• Year-over-year growth in aviation revenue anticipated.
• Overall revenue expected to decline for the third consecutive quarter.

General Electric Co. (GE) has experienced a four-year streak of declining annual revenue amid extensive corporate restructuring. The downturn intensified in 2020 when the COVID-19 pandemic caused a 20.4% revenue drop. Currently, GE faces additional hurdles such as labor shortages, inflationary pressures, and supply chain disruptions, which may impact its upcoming financial results.

Investors eagerly await GE's Q1 FY2022 earnings release on April 26, 2022, to assess how these factors have influenced the company’s performance. Analysts predict a slight revenue decrease and a reduction in adjusted earnings per share compared to the previous year.

Particular attention will be paid to GE’s aviation revenue, a critical indicator tied to the passenger airline industry's recovery. GE’s aviation division is responsible for designing and manufacturing aircraft engines, components, and mechanical systems. Experts forecast the fastest aviation revenue growth in over three years.

Over the past year, GE shares have lagged behind the broader market, delivering a total return of -16.7% versus the S&P 500’s 3.3%. The underperformance became pronounced from mid-November onward.

GE’s Earnings Performance Overview

In Q4 FY2021, GE posted mixed results: adjusted EPS exceeded expectations with a 58.6% year-over-year increase, yet revenue declined 3.5%, marking the 13th revenue drop in 14 quarters. Supply chain challenges partially contributed to this decline. However, strong order growth signals potential future expansion.

For Q3 FY2021, earnings surpassed estimates with a 50% EPS increase year-over-year, continuing a positive earnings trend after prior declines, while revenue slightly decreased by 0.5%. The aviation segment showed signs of recovery from pandemic impacts.

Looking ahead to Q1 FY2022, analysts anticipate a 23.9% year-over-year decline in adjusted EPS—the first since late 2020—and a 0.3% revenue drop, continuing a downward trend. Nonetheless, full-year FY2022 projections suggest a 52.4% EPS increase alongside 4.6% revenue growth, potentially ending years of contraction.

Source: Visible Alpha

Focal Metric: Aviation Revenue

GE’s aviation segment, encompassing commercial and military engine production, integrated components, and aftermarket services, is pivotal to the company’s revenue and profit streams. With plans to spin off healthcare and energy units, GE is sharpening its focus on aviation. The COVID-19 pandemic severely curtailed global travel, leading to a sharp decline in aviation demand and revenue.

In FY2020, aviation revenue plunged 33%, following 7.6% growth in FY2019. FY2021 saw a further 3.3% decrease, largely due to a 27.6% drop in Q1. Recovery began in Q2 FY2021 with a 10.4% increase, followed by 9.7% growth in Q3 and a slower 4.0% rise in Q4. For Q1 FY2022, analysts project a 14.6% year-over-year surge—the fastest since late 2018—though revenue remains below pre-pandemic levels. Full-year FY2022 aviation revenue is expected to grow 21.2%, marking the strongest growth in at least five years.

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