While Warning Of ‘Challenging Operating Environment’, GE Upgrades 2021 Earnings Forecast

A rebound in its jet-engine businesshelpedGeneral Electric Co to report quarterly profits that beat market’s expectations and prompted the company to announce an upward revision to its full-year earnings forecast on Tuesday.

However, the industrial conglomerate also issued a warning that it faced a “challenging” operating environment due to the acute issues in the global supply chain as well as the looming uncertainty of whether the US President Joe Biden’s infrastructure bill will contain an extension for the long term period of the production tax credits for its onshore wind investments.  

A severe labor shortage, as well as shortages in the supply of raw materials such as semiconductor chips and resins, is impacting GE, like almost all other manufacturers. The company predicts that its profit in its healthcare business would be impacted as it expects the supply chain issues to continue to torment through the rest of the current year and well into the next year.

The onshore wind business of the company is facing the ax of uncertainty over production tax credits. Customers could defer making investments in such projects if the US government decides to extend the incentives which will be a cause of concern for GE. Hence it has been predicted that there will be cash burnout this year in its renewable energy business.

The Boston-based company forecasts an adjusted profit of $1.80 to $2.10 per share in 2021, up from $1.20 to $2.00 previously.

Revenue growth, margin expansion, and stronger free cash flow are all expected from GE next year, according to the company. However, it lowered its free cash flow outlook for 2021 from $3.5 billion to $5.0 billion to $3.75 billion to $4.75 billion.

Shares were up 1.32% at $106.69 in premarket trading.

For the third quarter, the adjusted earnings of the company were at 57 cents per share. According to Refinitiv statistics, analysts projected 43 cents per share on average.

During the quarter, it generated $1.7 billion in free cash flow from industrial operations, compared to $514 million a year before.

(Adapted from CNBC.com)

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