General Electric's (GE 0.43%) upcoming earnings report is unlikely to produce any significant surprises on a headline basis. After all, management tends to give wide guidance ranges, and CEO Larry Culp spoke extensively about trading conditions at a conference in mid-September. However, the devil is in the details. Investors will be very interested in putting the pieces together to build a picture for 2022 and beyond. Here's what to expect from GE when it reports earnings on Oct. 26.

Headline guidance will hold

GE's full-year guidance for 2021 encompasses revenue growth in the low single digits, 250 basis points (where 100 basis points equal 1%) of margin expansion, adjusted earnings per share of $0.15-$0.25, and free cash flow (FCF) of $3 billion to $5 billion.

Culp has focused investors on GE's target of a high-single-digit FCF margin by 2023, implying around $7 billion in FCF -- a substantial figure given that the company's market cap is only $114 billion.

A person standing on a pedestal is holding a large arrow and looking out to the horizon with binoculars.

Image source: Getty Images.

Given how wide the FCF 2021 guidance is and the fact that in mid-September Culp told investors, "Continue to believe that holds," GE will likely maintain it. However, there's some debate around whether management will nudge expectations toward the high or low end of the range. One of the key concerns on FCF centers on GE Renewable Energy.

GE Renewable Energy

During the second-quarter earnings call, CFO Carolina Dybeck Happe outlined that the "biggest variable" for GE's cash flow came from its renewable energy business.

The uncertainty centers around whether production tax credits (tax credits given for electricity generated by renewable energy) will be extended over the long term in a Biden infrastructure bill. If there is an extension, then customers may delay some investment. On the other hand, if there isn't an extension, investment could be brought forward. Moreover, it's more important how customers feel about the matter.

A wind turbine against a clear sky.

Image source: Getty Images.

That said, if GE does nudge FCF expectations to the low end of its range due to issues around a production tax credit extension, then it's not a solid reason to get nervous. After all, an extension implies more long-term growth for GE.

More concerning is that GE's two main wind power rivals, Siemens Gamesa and Vestas, have both reduced full-year earnings expectations on the back of rising costs and supply chain issues. So it's hard not to think that GE Renewable Energy will also see some impact.

GE Power

GE Power is probably the most intriguing segment of all in the third quarter. The period tends to be weaker for it because power outages tend to decline during this time in the Northern Hemisphere. This means GE's higher-margin services tend to be softer.

However, there's been no shortage of anecdotal evidence of inclement weather conditions causing outages this year.  Hence, GE Power could have a better-than-expected third quarter this year.

A gas turbine.

Image source: Getty Images.

In addition, there's been some speculation that GE could sell its nuclear steam turbine business (steam turbines used in nuclear power stations). However, at the Morgan Stanley Laguna Conference in mid-September, Culp said the new CEO of GE Power, Scott Strazik, is going to "accelerate the restructuring in our Steam business, I think in a way that will help us all."

It will be interesting to hear what management has to say about the future of the steam business and what Strazik has planned.

GE Healthcare

On an investor update in early September, GE's VP of Investor Relations, Steve Winoker, said that the company was committed to its full-year healthcare guidance for revenue growth in the low to mid single digits and margin expansion of 100 basis points. Culp would later reiterate confidence in the margin expansion target.

Therefore, it will be a disappointing surprise if GE changes its healthcare guidance for 2021. That said, Culp also outlined significant supply chain issues, and Winoker said it would remain a "challenging environment" through the first half of 2022.

The critical thing to focus on here is what management says about 2022, and in particular, whether there's any risk of losing market share in what remains, in Culp's words, a "strong if not robust" demand environment.

GE Aviation

Frankly, there's little that GE's management can do about the flight departures that drive its commercial aviation aftermarket services business, and the market is well aware of what's happening with the reopening of international air travel.

Thus, it's more interesting to focus on what GE says about its far smaller military business. For example, the military business generated $4.6 billion in revenue compared with the total segment revenue of $22 billion in 2020.

An aircraft engine being serviced.

Image source; Getty Images.

Winoker previously said the business experienced output challenges due to supply chain challenges in the quarter, so it will be interesting to see if management maintains its revenue growth target of high single digits for the military business in 2021 and through to 2025.

Looking ahead

All told, the headline guidance looks safe. Still, there are near-term headwinds (notably supply chain issues in healthcare and military aviation) and one-off negative impacts (the production tax credit extension in renewables). However, on a more positive note, GE Power might provide an upside surprise.

Still, it's more important for investors to focus on management's commentary on overlying demand in healthcare and renewable energy; the continuing restructuring of GE Power; and the ongoing, although inconsistent, recovery in commercial flight departures. As long as these strategic profit drivers remain in place, investors shouldn't fret too much over a challenging quarter or two of earnings.