GE's Business Growth Accelerates in Late 2022 Amid Market Challenges
Discover how General Electric is navigating inflation and supply chain disruptions to boost growth in the second half of 2022, with strategic pricing and operational improvements.
General Electric (GE), the Boston-based industrial powerhouse, reports a promising upswing in business performance during the latter half of 2022, despite persistent inflation and supply chain hurdles.
On May 12, GE revealed that its diverse operations are poised for stronger growth in the months ahead, thanks to strategic price adjustments and enhanced cost efficiencies.
Highlights to Note
- GE anticipates improved growth across all divisions despite ongoing inflation and supply chain challenges.
- The company expects adjusted earnings per share (EPS) to land at the lower margin of its guidance due to global disruptions like China's lockdowns and the Ukraine conflict.
- Price increases and operational streamlining have been key tactics in mitigating these obstacles.
- Forecasts for 2022 adjusted EPS range from $2.80 to $3.50, alongside robust high-single-digit revenue growth year-over-year.
Recent investor communications indicate that while logistical challenges continue, GE’s pricing strategies and contract adjustments are cushioning the impact effectively. The jet engine manufacturer is also focusing on sourcing alternative components and boosting efficiency to cut costs.
GE’s CFO, Carolina Dybeck Happe, expressed confidence at the Goldman Sachs Industrials and Materials Conference, stating, "Though the environment remains volatile, we have a clear pathway to substantial growth in the second half of the year." This aligns with CEO Lawrence Culp’s earlier remarks emphasizing operational enhancements and innovation-driven growth, particularly in aviation and healthcare sectors.
Financial Projections for 2022
GE projects full-year adjusted EPS between $2.80 and $3.50, supported by strong revenue gains. Free cash flow is anticipated between $5.5 billion and $6.5 billion for 2022, with expectations to surpass $7 billion in 2023. However, CFO Happe noted that if earnings settle at the lower forecast range, cash flow growth might be more moderate.
Looking ahead, GE is progressing with a significant restructuring plan to establish three independent entities focused on energy, healthcare, and aviation, aiming to sharpen operational focus and unlock shareholder value.
Investor Impact
GE’s stock has declined over 22% this year, trailing the S&P 500’s 17.5% drop, and currently trades marginally above its 52-week low. The company’s optimistic outlook for the second half of 2022 may bolster investor confidence and help narrow this performance gap.
Note: The author holds no positions in GE securities at the time of writing.
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