GE first-quarter outlook disappoints, shares fall

By Rajesh Kumar Singh and Abhijith Ganapavaram

(Reuters) -General Electric Co flagged lower-than-expected profit in its current quarter, citing the sluggish pace of improvements at its renewable business, after fourth-quarter earnings topped forecasts on demand for parts and services at its jet engine business.

The company's shares were down about 1% in morning trade.

The Boston-based company said it expected the pace of profit improvement at its renewable business to gather steam in the second half of the year, but the performance in the first quarter "will look a lot like the fourth quarter."

The unit, part of the company's portfolio of energy businesses called GE Vernova, has failed to turn a profit in the past two years, though its losses in the fourth quarter narrowed from a year ago.

"There's a little bit of lag between order to revenue conversion," GE's Chief Financial Officer Rahul Ghai told analysts. "And so the renewables improvement will be more back-end loaded."

Overall, the company expects an adjusted profit of 60 to 65 cents a share in the quarter through March compared with 72 cents a share expected by analysts in a LSEG survey.

GE's aviation business has seen a surge in demand for aftermarket services as a strong rebound in travel and a shortage of new jets prompt airlines to keep their planes in the air for longer.

The company said the aerospace business, which makes engines for Boeing (NYSE:BA) and Airbus jets, is expected to report $6.0 billion to $6.5 billion in adjusted operating profit in 2024 and more than $5 billion in free cash flow.

The grounding of Boeing's 737 MAX 9 airplanes for safety checks after a cabin panel fell off during an Alaska Airlines flight this month as well as a snag with rival RTX's Pratt & Whitney Geared Turbofan (GTF) engines are expected to keep the demand high for aftermarket services.

"The recent Alaska Airlines accident makes the commercial aerospace aftermarket once again the safest portion of the sector," J.P. Morgan analyst Seth Seifman wrote in a note last week.

CFM International, GE's joint venture with France's Safran (EPA:SAF) SA, is an engine supplier for Boeing's 737 MAX jetliners and competes with RTX's Pratt & Whitney to power Airbus' 320neo jets.

GE, which has completed the separation of its healthcare business, said on Tuesday it would spin off GE Vernova into a separate company in early April.

As a result, it provided separate full-year estimates for its energy businesses and aerospace unit.

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GE said it expected GE Vernova to generate revenue of $34 billion to $35 billion and free cash flow of $700 million-$1.1 billion in 2024.

GE's adjusted profit for the December quarter of $1.03 per share, came above 91 cents a share expected by analysts. Total revenue rose 15% to $19.42 billion.