What happened
Shares of General Electric (GE 1.78%)were down by 7% as of 12:06 p.m. ET Tuesday after the industrial giant (soon to become three smaller industrial companies) beat earnings expectations for its fiscal fourth quarter -- but missed badly on revenue.
Ahead of the report, analysts had forecast an $0.87 per share pro forma profit for General Electric, and it beat that number handily, earning $0.92 per share. On the top line, however, analysts were looking for $21.5 billion, but GE came up short with $20.3 billion.
Image source: Getty Images.
So what
Quarterly revenues were down by 3% year over year at GE, while pro forma profits surged 58%. That's the good news. The bad news is that when calculated according to generally accepted accounting principles (GAAP), GE actually lost money for the quarter. It reported a $3.55 per share GAAP loss, with a negative 17.1% net profit margin.
For 2021 as a whole, GE's revenues were down 2% to $74.2 billion, with a big GAAP loss of $6.16 per share -- though its net margin was a less ugly negative 5%.
On the plus side, GE did generate free cash flow of $3.7 billion for the quarter, $1.9 billion for the year, and produced industrial free cash flow of $5.1 billion.
Now what
Commenting on the results, CEO Lawrence Culp highlighted the fact that his company "delivered solid margin, EPS, and free cash flow performance in 2021, exceeding our outlook." Furthermore, he said, "orders for the year were up double digits, supporting faster growth going forward, [although] supply chain challenges, commercial selectivity, and uncertainty surrounding the U.S. wind production tax credit impacted our top-line."
Culp predicted that GE will continue to grow its free cash flow this year to a range of $5.5 billion to $6.5 billion, and anticipates free cash flow in excess of $7 billion in 2023. Organic revenues -- i.e., revenues not counting the contributions from any acquisitions the company makes -- are expected to grow by a high-single-digit percentage this year, reversing 2021's declines. Profit margins on those revenues should expand by about 1.5%, with pro forma per share profits reaching $2.80 to $3.50.
For the time being, however, it appears investors are focusing on the revenue miss last year, and punishing GE stock accordingly.
