GE rises after strong update for aerospace business

January 24, 2023 7:48 AM EST

By Geoffrey Smith -- General Electric (NYSE: GE) stock rose in premarket trading on Tuesday after the industrial giant beat forecasts in the final quarter of 2022 and predicted another strong year ahead for its aerospace business in particular.

GE, which is still working through a multi-year program to cut debt and simplify its sprawling operations, said adjusted earnings per share in the three months through December rose by more than 50% from a year ago to $1.24. That was ahead of expectations for $1.15 and represented nearly half of the company's earnings for the whole year. Revenue also came in ahead of expectations at $21.79 billion, up 7% on the year, while free cash flow rose 16% to $4.29B.

For the coming year, GE said it expects adjusted EPS - excluding GE HealthCare which is now a standalone company - to total between $1.60 and $2.00, while organic revenue is expected to grow by just under 10% and free cash flow is seen in a range around $3.80B.

GE's aerospace division is set to enjoy the significant tailwind of the recovery in international travel this year, as China joins most of the rest of the world in lifting public health restrictions on air passengers after its shift away from the Zero-COVID strategy at the end of 2022. It added that it also expects military aerospace orders to deliver "significant profit growth" for the division this year, against the backdrop of increased defense spending across the West due to the war in Ukraine.

GE expects aerospace revenue to grow by a little under 20% this year, with an operating profit of around $5.5B.

By contrast, its power divisions, which incorporate both renewables and gas and steam turbines, are still struggling for profitability, with the anticipated boost from the Biden administration's Inflation Reduction Act and all its support for domestic green energy initiatives still some way out in the future. GE Vernova, which houses the power business, is expected to lose between $200M and $600M at an operating level this year, with revenue growth likely to come in below 5%.

By 07:30 ET (12:30 GMT), GE stock was up 0.6% in premarket, outperforming the broader S&P 500 and Dow futures, as the outlook for the aerospace division outweighed the weak guidance for Vernova.

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