General Electric Reports Strong Q4 Results and Upcoming Spinoffs

General Electric (GE) has announced its fourth-quarter results, exceeding expectations with adjusted earnings per shareEarnings per share (EPS) is a fundamental financial metric that provides valuable insights into a company's profitability. This widely used indicator helps investors and analysts g... More (EPS) of $1.03, surpassing the consensus estimate of 90 cents. The conglomerate also reported Q4 revenue of $19.4 billion, significantly beating the consensus forecast of $17.42 billion. Additionally, GE revealed total orders of $21.7 billion for the fourth quarter.

Preparing for Momentous Changes in 2024

GE’s Chairman and CEO, H. Lawrence Culp, Jr., expressed optimism about the company’s future, highlighting that 2024 would be a momentous year. In early April, GE Aerospace and GE Vernova are set to launch as independent public companies. Both entities will continue GE’s commitment to innovation and continuous improvement, with a heightened focus on their respective industries.

Culp emphasized that these two companies possess substantial and valuable installed bases, along with enviable service franchises that enable them to maintain close relationships with customers on a daily basis. He expressed pride in GE’s accomplishments and excitement for the next chapter, with GE Aerospace pioneering the future of flight and GE Vernova leading the energy transition.

Positive Outlook and Growth Prospects

GE reported that orders had increased across all segments and described its Q4 performance as a solid close to the year. The growth was attributed to robust demand and leaner, more focused business operations. Notably, total engine deliveries in the fourth quarter were up by 11% compared to the previous quarter.

The company expressed confidence in its ability to achieve revenue, profit, and cash growth for GE Aerospace and GE Vernova in FY24. Specifically, it expects a strong start for GE Aerospace in the coming fiscal year, with Q1 margins for both Aerospace and Vernova in line with previous guidance. Additionally, GE anticipates a compelling dividend from GE Aerospace and is eager to be more proactive in its aerospace endeavors.

Analysts’ Optimism and Price Target Updates

Several financial analysts have responded positively to GE’s Q4 results and its plans for the spinoff of GE Aerospace and GE Vernova.

• Bank of America (BofA) raised its price target on GE shares from $135 to $145 and maintained a Buy rating. BofA cited signs of Vernova’s turnaround gaining momentum and highlighted that GE’s 2024 guidance separates GE Aerospace and GE Vernova, aligning with post-spin reporting. This move led the firm to raise its 2024 adjusted EPS and free cash flowThe cash flow statement provides a detailed overview of the cash inflows and outflows of a company over a specified period of time. It includes cash received from operations, inves... More estimates, expecting the Vernova spin-off to have a positive impact.
• Argus analyst John Eade increased the price target for GE from $130 to $150 and maintained a Buy rating. Eade noted that GE’s new management team has successfully addressed the challenges faced between 2015 and 2018. Despite setbacks caused by factors like inflation and the pandemic, GE’s turnaround is making progress. Eade suggested that the company’s earnings potential could reach as high as $7.50 per share, with an operating marginThe operating margin is a critical financial metric that measures a company's ability to generate profit through its core operations. It provides valuable insights into a company's... More approaching the industry average.
• Wells Fargo analyst Matthew Akers raised GE’s price target to $148 from $144 while maintaining an Overweight rating. Akers believes that GE’s initial Aero guidance, although conservative, positions the company for potential outperformance later in the year, especially if aftermarket demand remains strong. He also noted that the Vernova spin-off is on track for early Q2.

Bottom-line: General Electric’s strong Q4 results and the upcoming spinoffs of GE Aerospace and GE Vernova have generated optimism among analysts. The company’s focus on innovation, growth prospects, and strategic initiatives are viewed positively, setting the stage for significant developments in the coming year.