The maker of power plants, jet engines, medical scanners and other industrial equipment said its profit and sales declines largely reflected sale of its appliances business, and it affirmed its full-year forecast for cash flow, profit, revenue and operating margin.
However, it expects full-year profit and cash flow to be at the low end of its forecasts.
GE said it would update its 2018 earnings target of $2 a share in November, later than analysts had expected.
Analyst consensus 2018 estimate is $1.73, according to Thomson Reuters I/B/E/S.
“Until this earnings reset plays out, the stock will essentially remain in a state of limbo,” Deane Dray, an analyst at RBC Capital Markets, said in a note.
Incoming CEO John Flannery acknowledged his review would take time, but it was under way and wasn’t altering GE’s operations or 2017 outlook. “I’m not worried that we’re going to be dead in the water in the meantime,” he said.
Shares were down 4.1% at $25.58 in early trading.
GE faced a “slow-growth, volatile environment” in the quarter, Chief Executive Jeff Immelt said in his final earnings release before his August 1 retirement, when GE healthcare chief Flannery takes over.
Immelt’s tenure began days before the September 11, 2001, terrorist attacks and included the 2008 financial crisis.
While GE stock is 27% below its price when Immelt arrived, it has more than tripled from its nadir in 2009.
Immelt sold off NBCUniversal, appliances and most of GE Capital.
He acquired power assets from Alstom of France, merged GE’s oil and gas business with Baker Hughes, and moved the headquarters to Boston.
Flannery’s review could change GE’s portfolio and strategy. GE is “in the middle of a series of deep dives into the businesses,” Flannery said on a conference call with analysts.”We also are taking a hard look at our corporate spending” to ensure it contributes to earnings.
GE has cut $670mn in industrial overhead costs so far this year, Immelt said, and will “meet or exceed” its $1bn target for 2017 — a goal set after discussion with activist investor Trian Fund Management.
GE was under pressure to report strong cash flow after a weak showing in the first quarter that included an unexpectedly large $1.6bn outflow of cash due to slow customer payments and failure to deliver some power plant equipment.
Cash flow from operations totalled $3.6bn, up from $400mn in the first quarter.
The figure was down 67% from a year ago, partly reflecting the loss of contributions from the appliances division.
Revenue fell 12% to $29.56bn, slightly above the $29.02bn consensus estimate of analysts polled by Thomson Reuters I/B/E/S.
GE said its appliances sale eliminated $3.1bn of revenue.
Net profit slumped 59% to $1.34bn, or 15 cents a share, in the quarter ended June 30, from $3.30bn, or 36 cents a share, a year earlier. Adjusted earnings fell 45% to 28 cents a share, compared with estimates for 25 cents.
Encana Corp
Encana Corp, Canada’s No 2 oil and gas producer, posted a quarterly profit that handily beat analysts’ estimates and raised its full-year core asset production growth forecast.
An Opec-led production cut and a rebound in demand have helped increase oil prices, which are presently hovering around $50 per barrel.
Encana has also benefited from downsizing its operations to focus on four core North American assets: the Montney and Duvernay in western Canada, and the Eagle Ford and Permian in the United States.
Both US and Canadian shares of Encana were up about 3% in early trading yesterday.
The company raised its 2017 core asset production growth forecast to between 25% and 30% from the more than 20% growth it had forecast in May.
Encana said it was on track to meet its capital expenditure forecast of between $1.6bn and $1.8bn and production of 320,000 barrels of oil equivalent per day (boe/d) to 330,000 (boe/d).
“The fact that it chose to bump up production guidance rather than reduce capex guidance...is an interesting data point,” Cormark Securities analyst Amir Arif said.
Rivals would be in a similar position to improve their forecasts following Encana’s lead, he added.
Encana reported operating earnings of 18 cents per share, which largely beat analysts’ average estimate of 4 cents per share, according to Thomson Reuters I/B/E/S.
Calgary-based Encana posted net earnings of $331mn, or 34 cents per share, in the second quarter ended June 30, compared with a loss of $601mn, or 71 cents per share, a year earlier, when it took impairment and hedging charges of about $641mn.
Operating earnings, which exclude most one-time items, doubled to $180mn.
However, Encana said core asset production fell to 246,500 boe/d from 268,300 barrels boe/d in the year-ago quarter.
Total oil and gas production fell to 316,000 boe/d, including total liquids production of 124,900 barrels per day (bbls/d), from 368,300 boe/d a year earlier.
Honeywell
Honeywell International reported a better-than-expected quarterly profit, as sales in its aerospace unit and the business that caters to the energy industry were not as bad as it had feared.
Sales in Honeywell’s aerospace business, its biggest, fell about 3% to $3.67bn in the second quarter ended June 30, smaller than the company’s forecast of a decline of 5 to 7%. Margins in the unit rose to 22.3% from 20.9%, Honeywell, which makes products ranging from aircraft engines to handheld barcode scanners, said.
The unit, which makes jet engines and provides spare parts, repair, overhaul and maintenance services, benefited from strength in its commercial aviation after-sales business and growth in US defence volumes, Honeywell said.
Honeywell is reviewing whether to separate its aerospace business, a move hedge fund Third Point wants the US industrial conglomerate to pursue.
Third Point, run by billionaire Dan Loeb, in April said the spin off of the aerospace business could create more than $20bn in shareholder value.
Sales in Honeywell’s performance materials and technologies unit, which makes catalysts and adsorbents used for petroleum refining, dropped about 8% to $2.24bn in the quarter.
Honeywell had forecast a decline of 10% to 12%. The business benefited from higher sales of Honeywell’s Solstice low global-warming potential refrigerant products, the company said.
Margins in the business rose to 23.4% from 21.4%. Honeywell also raised the low end of its full-year earnings per share forecast range by 10 cents to $7.00.
The company kept the high end of the range unchanged at $7.10.
Honeywell said it now expects 2017 sales in the range of $39.3bn to $40bn, compared with its previous forecast of $38.6bn to $39.5bn. Analysts on average were expecting 2017 earnings of $7.09 per share on revenue $39.43bn, according to Thomson Reuters I/B/E/S.
Net income attributable to Honeywell increased 5.5% to $1.39bn, or $1.80 per share, in the second quarter. The company’s revenue rose about 1% to $10.08b