General Electric Co. reported profits fell in its latest quarter and outlined plans to cut costs in its renewable-energy business where troubles offset strong gains in the company’s aerospace division.
GE
GE 0.74%
said it remains on track to break itself apart into three companies, starting with a spinoff of its healthcare business in January, even as losses in its power business weighed down its overall results and prompted the company to cut its profit targets for the year.
GE lowered its adjusted earnings forecast for 2022, to a range between $2.40 and $2.80 a share, from $2.80 to $3.50 a share projected at the beginning of the year. In July, the company had warned that it expected results to come in at the low end of the initial range.
The conglomerate maintained its forecast for revenue growth for the year, but said its free cash flow, a closely watched metric of how much money its businesses generate, would come in at the low end of its prior forecast—already reduced from early in the year.
GE said it was launching a corporate restructuring program to deliver $450 million in annual savings and a restructuring program in its Vernova power business, primarily in its renewable-energy operations, to save another $500 million a year. The unit makes power turbines for power plants as well as wind turbines. It expects the Vernova business to tally losses of about $2 billion for 2022, which it tied to inflation, lower demand and elevated warranty pressure.
GE said the moves would result in restructuring charges totaling about $1.3 billion. It didn’t say how many jobs would be impacted by the moves. CEO
Larry Culp
has been streamlining the conglomerate, shrinking headquarters staff and revamping operations. Last week, the company said it was looking to sell its famed management training academy.
Shares of GE rose about 1.5% in premarket trading. The stock has declined 22.3% so far this year, compared with a 25.4% decline in the S&P 500 index.
Overall, GE reported a second-quarter net loss of $55 million, worsened from the year-earlier profit of $584 million. Excluding items, GE said its adjusted earnings were 35 cents a share, below Wall Street’s estimate of 49 cents, and 53 cents in the year-earlier quarter. Revenue was $19.08 billion versus $18.57 billion a year ago. Analysts had projected $18.77 billion, according to S&P Global Market Intelligence.
Quarterly revenue rose 24% in the aerospace business, which makes and services jet engines, and rose 6% in the healthcare business, which sells medical equipment. Revenue fell 15% from a year ago in renewables and 12% in the rest of the power business.
The company said it was able to raise prices in its aerospace division faster than its own costs rose, and called pricing in its healthcare segment positive. Pricing also improved in its renewables unit, but only enough to partially offset lower volume and other challenges.
GE had reported raising prices in all its segments during the second quarter, and said in July it expected to continue to do so this year amid rising costs. GE said earlier this year that it expected rising costs would outstrip its ability to raise prices, but that the gap would start to shrink in the second half, thanks largely to the company’s efforts with its suppliers.
The company said Tuesday that it now expects free cash flow for 2022 to come in around $4.5 billion. After the second quarter, GE cut projections for 2022 free cash flow by about $1 billion, from the $5.5 billion to $6.5 billion it had predicted in January.
Write to Theo Francis at theo.francis@wsj.com
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