Renewable energy business struggles, GE earnings forecast disappoints

CHICAGO, Jan 24 (Reuters) – General Electric Co ( GE.N ) beat quarterly earnings estimates on Tuesday on strong demand for jet engines and power equipment, but the world’s largest oil and gas company rose as problems persisted in its renewable energy business. The outlook for the year is disappointing.

The Boston-based conglomerate is grappling with inflation headwinds, which were also noted by fellow industrialists 3M (MMM.N) and Raytheon Technologies (RTX.N) on Tuesday. In addition, business surveys showed that the U.S. economy is cooling, clouding the outlook for businesses in the coming year.

Chief Executive Larry Culp said in an interview that while demand for trucking companies is slowing, the company is confident the aerospace industry will recover and the need to reduce carbon emissions will underpin demand for GE products.

“We probably have a level of resilience that helps us a lot,” Culp told Reuters.

Shares of GE were down about 0.5 percent in morning trade.

Culp said the company is still grappling with inflation and supply chain pressures. He expects inflation to remain a “test” for GE, even as it adjusts prices to offset higher costs.

GE is not alone. Raytheon expects labor and material inflation to cost it about $2 billion by 2023, while 3M said inflation is driving up raw material and logistics costs.

While GE has not seen any material improvement in supply chain issues, it has sought to address them, Culp said. For example, the company has deployed hundreds of workers on-site at its aerospace suppliers to ease some bottlenecks.

For the full year, GE expects adjusted earnings of between $1.60 and $2.00 a share, below analysts’ average estimate of $2.36 a share, according to Refinitiv data.

The company forecast first-quarter earnings per share of 10-15 cents, missing analysts’ estimate of 19 cents per share. It also expects to burn through cash in the March quarter, which tends to be the weakest.

It forecast an operating loss for 2023 at its energy business, GE Vernova, of between $200 million and $600 million.

The company’s renewable energy business has been facing challenges due to inflation and supply chain pressures. The unit reported a loss of $2.2 billion in 2022.

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GE is reducing global headcount at its onshore wind unit by about 20% as part of a plan to restructure and resize the business.

Culp said the onshore business was expected to get a boost as tax credits for wind power projects resumed.

High inflation also poses a challenge to the offshore wind business because it makes customers scrutinize the economics of their projects, he said.

GE, which completed the spinoff of its health care unit earlier this month, plans to spin off its energy business, which includes renewable energy, into a separate company next year.

Fourth-quarter adjusted profit of $1.24 per share beat analysts’ average estimate of $1.13 per share.

Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; Editing by Saumyadeb Chakrabarty, Mark Potter, Nick Zieminski and Bernadette Baum

Our Standards: The Thomson Reuters Trust Principles.

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