Three very different companies raised their full-year guidance in their recent results, and all look set for multi-year growth. Here's why aerospace, power, and renewable energy company General Electric (GE -3.19%), U.S. automation leader Rockwell Automation (ROK -1.29%), and electrical products maker nVent Electric (NVT 0.13%) are building momentum in 2023.
General Electric is preparing to fire on all cylinders
With its healthcare spinoff completed, GE is preparing to spin off GE Vernova (a business comprising GE Power and GE Renewable Energy) in early 2024. The good news ahead of that event is all three of its businesses are improving.
Indeed, a combination of better-than-expected performance in the first quarter and a 26% increase in orders in the quarter led management to raise the low end of its earnings and free cash flow (FCF) guidance for 2023. Management now expects full-year EPS of $1.70-$2, compared to $1.60-$2 previously. FCF is now forecast to be $3.6 billion to $4.2 billion, compared to $3.4 billion to $4.2 billion previously.
Orders increased 14% at GE Aerospace as the business continues to enjoy the recovery in commercial flight departures. An excellent way to monitor progress at GE Aerospace is by looking at its engine spare parts sales rate through the quarter. As you can see below, the first quarter is the first quarter to beat its comparable figure in 2019 from before the pandemic.
Data source: General Electric presentations.
Meanwhile, falling natural gas prices will likely encourage gas turbine usage -- something that would likely benefit GE Power's higher-margin services revenue. And finally, the whopping 94% increase in renewable energy orders indicates the release of pent-up spending on U.S. onshore wind power driven by the Inflation Reduction Act of 2022.
All told, all of GE's segments show signs of ongoing improvement, which bodes well for the GE Vernova spinoff.
Rockwell Automation keeps growing
The discrete (individual products), process (raw materials), and hybrid (combining both, such as in food & beverage) automation company has raised its full-year 2023 sales and earnings guidance twice already this financial year. Rockwell's year finishes at the end of September, so it's trading in its fiscal third quarter.
Management started the fiscal year expecting organic sales growth of 9%-13%, but has now raised guidance to 13%-17%. Meanwhile, adjusted EPS guidance has risen from 9%-13% to 13%-17%.
The move comes as the supply chain issues that dogged the industrial sector in 2022 have started to ease, helping Rockwell deliver on its backlog. However, it's not just a story of existing backlog; Rockwell's orders are also set to remain solid through 2023.
For example, CEO Blake Moret believes Rockwell will book $9 billion worth of orders in 2023 (compared to revenue of $8.9 billion) and end the financial year with a backlog of $5 billion. It's an outlook that supports ongoing growth, and industrial customers continue to see the adoption of automation as a solution to the supply chain and labor issues created by the pandemic. In addition, automation helps companies reduce supply chain complexity by allowing them to be more flexible over plant locations -- they can cost-effectively build plants in relatively higher-labor-cost countries using automation.
This all points to long-term growth at Rockwell.
nVent Electric electrifies the economy
Finally, there's no letup in the economy's electrification trend. Just as GE won two significant orders to connect renewable energy sources to the grid in the first quarter, and Rockwell's Moret believes there are "historic generational spending levels in certain of the verticals that are important to us, things like electric vehicle and battery and semiconductor," so demand for nVent's products remains in growth mode.
nVent is something of a "picks and shovels" play on the trend, with its electrical connection and protection products being an essential part of its customers' installations. Its products are a necessity to meet regulatory requirements around safety, and they also improve productivity.
nVent raised its full-year 2022 guidance on every earnings call last year, and started 2023 doing the same. The company's earnings were better than expected in the first quarter as it raised prices to more than offset cost increases, and management raised full-year adjusted EPS guidance to $2.65-$2.73 from $2.51-$2.61 previously.
While nVent's order growth could slow as its lead times normalize -- customers were ordering ahead as lead delivery times were lengthy because of the supply chain crisis -- its underlying growth trends, driven by spending on automation, smart building, data centers, infrastructure, and energy, are likely to remain solid.
