What happened
For four days running, shares of industrial giant General Electric (GE 1.78%) have gone nowhere but down, including a 3.7% decline on Friday. Partially, that downward pressure has come from inflation and rising interest rates, and partially from the possibility that its labor costs will rise. But as we learned Friday, these are only some of the headwinds GE faces.
Its really big problem is in the supply chain.
NYSE: GE
Key Data Points
So what
"Supply chain continues to be tough and continues to impair our ability to deliver to our customers," said GE CFO Carolina Happe during her speech at Morgan Stanley's Laguna Conference in California on Thursday.
All of GE's businesses have encountered supply chain difficulties, noted a Reuters article, costing GE perhaps 5% of the revenue it might otherwise have booked in the second quarter and limiting the company to just 2.2% revenue growth in the quarter.
Now what
The stock market is famously forward looking, so what do GE's continued supply chain problems portend for the company's upcoming third-quarter report, due out next month? Happe didn't offer investors any hard revenue numbers in her talk. What she did say was that Q3 free cash flow (FCF) probably won't be much improved compared with Q2.
With GE unprofitable in four of the past five years and now looking likely to report another loss in 2022, investors are abandoning ship before the bad forecast turns into actual bad news.
I cannot say I blame them.
