GE whipsaws as aerospace gains counter wind business woes

General Electric reported better-than-expected cash performance in the third quarter amid strength in its jet-engine business, helping the manufacturer counter a deterioration in its wind operations and persistent supply-chain challenges.

GE Aerospace sales jumped 24 per cent while profit soared 52 per cent in the period, reflecting demand for maintenance and services by airlines needing to keep their planes in the air during the busy summer travel season. Deliveries of the newest Leap engines for Boeing and Airbus narrow-body jets improved more than 50 per cent from the second quarter.

The performance was “fuelled by the improving commercial backdrop and our progress managing operations and the supply-chain environment,” chief executive Larry Culp said in a statement.

The strength in aerospace contrasted with a sharp downturn in the renewable-energy unit, underscoring the broad challenges facing Culp as he tries to revive the once-mighty conglomerate. He’s now preparing to break GE into separate companies focused on the healthcare, aerospace and power equipment industries, starting with the planned spin-off of GE HealthCare in January.

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GE’s shares were volatile following the report, falling as much as 8.7 per cent premarket before narrowing its loss to about 1 per cent.

GE reported adjusted earnings per share of 35 cents in the past quarter, compared to an average of 47 cents expected by analysts. Free cash flow — a closely watched measure of underlying earnings power — was $1.2 billion, far surpassing the $319 million expected by analysts.

“Overall, a mixed quarter,” John Walsh, a Credit Suisse analyst, said in a note.

GE Renewable Energy saw operating losses balloon to $934 million in the third quarter as orders plummeted 43 per cent and sales fell 15 per cent. Though never a cash cow, the company’s wind turbine unit has deteriorated over the last year alongside soaring inflation, supply chain snags and policy shifts in the US that have stunted near-term demand.

The company said it would restructure its power-related businesses, focused on the renewable energy unit. The plan, which will generate an expense of about $600 million, should deliver about $500 million in annual savings, it said.

GE cut its full-year profit target as it grapples with the renewables weakness. Adjusted earnings per share will be $2.40 to $2.80, GE said, after previously guiding to the low end of a range of $2.80 to $3.50. Analysts had estimated $2.67 on average.

The company also said it now expects its adjusted organic profit margin this year to expand as little as 125 basis points. GE now forecasts free cash flow of about $4.5 billion. — Bloomberg