General Electric (NYSE: GE) impressed shareholders last year with one of the best stock performances in a long time, justifying CEO Lawrence Culp’s claim that the company is in a multi-year transformation. When the industrial giant reports fourth-quarter results this week, the market will be looking for updates on its strategy to achieve a turnaround.
Estimates
It is widely expected that earnings would increase by 6% annually to $0.18 per share in the December quarter on revenues of $25.59 billion, which represents a 23% year-over-year decline. The report is scheduled to be published on Wednesday before the opening bell.
The company recorded positive organic revenue growth in recent quarters even as the organizational restructuring gathered pace. GE’s impressive backlog and cash flow shows it has managed to tackle the key headwinds, including macroeconomic uncertainties and impact of the 737 Max crisis on its aviation business.
Tailwinds
The industrial division is estimated to have fared well in the final months of fiscal 2019, though the Power segment continues to face pricing and demand-related issues. Also, the Renewable Energy unit is attracting customers with its revamped product portfolio. Thriving on the success of the LEAP aircraft engine, the Aviation unit is estimated to have contributed to the top-line.
In three out of the four trailing quarters, the industrial conglomerate reported better-than-expected earnings, reflecting the improvement in margin performance. That the management maintained its full-year earnings outlook, despite the challenging market conditions and divestiture of the Baker Hughes business, shows that the positive trend continued in the fourth quarter.
737 Max Setback
Meanwhile, the company, which is a leading supplier of aircraft engines, will be among the most affected by Boeing’s (BA) recent decision to stop the production of 737 Max. The aircraft model was grounded across the globe last year after two deadly crashes.
GE’s Third-quarter earnings rose in double digits to $0.15 per share, despite flat revenues, benefiting from the improvement in margin performance. The market responded positively to the above-consensus results and the stock gained. Since then, a clear uptick in the share performance is visible, though they are yet to fully recover from the lows. The stock has gained 18% since the beginning of 2020.