What happened
After General Electric (GE 1.18%) reported its first-quarter 2022 earnings earlier this week, its stock sank, and the number just kept dropping as the week progressed. GE shares dropped 10% on Tuesday after the report and are down nearly 13% for the week as of early Friday, according to data provided by S&P Global Market Intelligence.
So what
Total orders for the quarter grew 11% year over year, driven mainly by the aviation segment. That's not too surprising; airlines have been seeing a strong recovery as consumers look forward to traveling more. Orders and revenue grew 31% and 12%, respectively, in aviation. But those metrics dropped materially in the renewable energy segment, and GE management warned investors that several headwinds remain for its overall business.
Image source: Getty Images.
Now what
GE didn't change its 2022 outlook after the report, but the implication of that possibility was clear. Chairman and CEO Larry Culp told investors, "as we continue to work through inflation and other evolving pressures, we're currently trending toward the low end of the [guidance] range."
Investors likely aren't expecting any major contribution from the renewable energy portion of the business. But GE investors are focused on its aviation segment, which represented more than one third of total revenue in the quarter. And while the airlines themselves are reporting that business is improving, the major supplier to them is not.
The day after GE announced its quarterly update, Boeing reported a disappointing first quarter of its own. Investors didn't just sell Boeing after that news; they also kept selling GE shares. If Boeing continues to struggle in producing planes, it doesn't help GE in the short term that the airlines are ordering them. GE's jet engine business will also depend on Boeing, and investors seem to think that a turnaround there still has a long way to go.
