William Huston, AIF®, AIFA®

General Electric shares fell today, why?

William Huston, AIF®, AIFA®

William Huston, AIF®, AIFA®

General Electric shares fell today, why?

GE shares were down 7% as of 12:06 p.m. ET posted significant earnings Tuesday after the industrial giant (soon to be three smaller industrial companies) beat sales forecasts for its fiscal fourth quarter.

At the start of the report, analysts had forecast initial earnings of $0.87 per share for General Electric, and the company beat that figure by a wide margin to post earnings of $0.92 per share. In terms of revenue, analysts had expected $21.5 billion, but GE was behind by $20.3 billion.

GE's quarterly revenue fell 3 percent year over year, while default earnings rose 58 percent. That's good news. The bad news is that GE lost on a GAAP basis during the quarter. It lost $3.55 per share on a GAAP basis, with a negative net income margin of 17.1 percent.

For all of 2021, GE's revenue fell 2 percent to $74.2 billion, with a whopping GAAP loss of $6.16 per share, despite a 5 percent decline in net income margin. On the positive side, GE generated $3.7 billion in free cash flow for the quarter, $1.9 billion for the full year and $5.1 billion in free cash flow.

Commenting on the results, CEO Lawrence Klub noted that his company "delivered solid results in terms of margins, earnings per share and free cash flow in 2021 that exceeded our expectations." "Orders for this year are double-digit, supporting faster growth going forward, despite supply chain challenges, trade eligibility and uncertainty about U.S. tax credits impacting our outperformance," the report said.

Culp forecast that GE will continue to grow free cash flow to between $5.5 billion and $6.5 billion this year and predicted that free cash flow will exceed $7 billion by 2023. Organic sales, i.e., sales outside the company, are expected to grow in the single digits this year, reflecting a decline from 2021. Profit margins are expected to increase by about 1.5% on nominal earnings per share. Between $2.80 and $3.50. But for now, investors seem focused on losing earnings over the past year and punishing GE stock accordingly.


Smith, R. (2022, January 25). Why General Electric Stock Crashed Today. The Motley Fool. Retrieved January 25, 2022, from https://www.fool.com/investing/2022/01/25/why-general-electric-stock-crashed-today/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


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