General Electric's Soft Guidance Sparks Concerns As GE Aerospace And GE Vernova Spin-Off Nears

General Electric Company GE reported fourth-quarter fiscal 2023 revenues of $19.4 billion, an increase of 15% year-over-year, and Adjusted revenue of $18.5 billion (+13% Y/Y organically), beating the consensus of $17.42 billion.

Total orders increased by 8% Y/Y to $21.7 billion and up 7% on an organic basis. Adjusted EPS was $1.03, up from $0.66 a year ago, beating the consensus of $0.90.

GE reported a profit margin GAAP of 10.3%, up by 90 bps, and an Adjusted organic operating margin of 10%, up 50 bps organically.

Aerospace’s revenues rose 12% Y/Y to $8.52 billion, driven by Commercial Engines and Services, while orders grew 10% to $10.62 billion, reflecting continued services strength and strong commercial engine orders.

GE Vernova Renewable Energy revenues increased by 23% Y/Y to $4.21 billion and up 19% on an organic basis driven by Grid and Offshore Wind; Orders were $5.07 billion for the quarter compared to $5.03 billion a year ago.

GE Vernova Power Orders grew 5% Y/Y to $5.73 billion. Revenues increased by 15% Y/Y and +12% organically to $5.78 billion, driven by Gas Power with equipment revenue growth.

Operating cash flow for the fourth quarter totaled $3.216 billion, compared to $3.664 billion a year ago. Free cash flow was $2.96 billion for the quarter.

The company repurchased ~2.2 million shares for $0.3 billion in the quarter. For 2023, GE repurchased approximately 10.6 million shares for $1.1 billion.

Related: General Electric Likely To Report Lower Q4 Earnings; These Most Accurate Analysts Revise Forecasts Ahead Of Earnings Call

GE received total proceeds of $2.0 billion in the quarter from the sale of its remaining AerCap Holdings N.V. AER shares. GE incurred separation costs of $0.3 billion in the quarter and $1.0 billion for the year, primarily related to employees, establishing standalone functions and IT systems, and professional fees.

Guidance: For the first quarter of 2024, GE expects to deliver high-single-digit revenue growth and free cash flow in line with net income growth. For Q1, GE expects to report an adjusted EPS of $0.60 to $0.65, versus $0.72 consensus.

FY24 Guidance: GE’s FY24 guidance reflects GE Vernova and GE Aerospace operating independently.

GE Vernova expects to deliver revenue of $34 billion-$35 billion, adjusted EBITDA margin of mid-single digits, toward the higher end of the range, and free cash flow of $0.7 billion-$1.1 billion. 

GE Aerospace expects adjusted revenue to grow low double digits or more, operating profit of $6 billion-$6.5 billion, and free cash flow greater than $5 billion. 

“2024 will be a momentous year as GE Aerospace and GE Vernova plan to launch as independent public companies in early April. Both companies will carry forward GE’s commitment to innovation and continuous improvement, with even sharper focus on their vital, growing industries,” commented GE Chairman and CEO and GE Aerospace CEO H. Lawrence Culp, Jr.

Price Action: GE shares are trading lower by 3.99% at $126.00 premarket on Tuesday.

Photo by Chuck Miller via Flickr