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General Electric (GE) topped second quarter earnings estimates on Tuesday while reporting positive cash flow and cash flow guidance. Aviation Rival Raytheon Technologies (RTX) also beat earnings and cash flow forecasts. GE and Raytheon shares rose early on Tuesday, signaling moves above key levels as they approach buy points.
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The results for jet engine makers come as airlines order more planes to meet rebounding travel demand, while Boeing (BA) is stepping up deliveries of its 737 Max after an extended break.
GE benefits
Estimates: Wall Street expects GE to drop to 3-cent EPS after losing 15 cents a share a year ago. Revenue rose 2% to $ 18.14 billion, according to FactSet. In addition, analysts forecast cash consumption of $ 338.3 million in the second quarter.
Results: GE profits were 5 cents a share, as revenue rose 8.9% to $ 18.3 billion. Industrial cash flow reached a positive $ 400 million from consumption of $ 2.068 billion a year ago.
Aviation revenues rose 10% to $ 4.84 billion and orders jumped 47% to $ 5.5 billion. Healthcare revenue soared 14% to $ 4.45 billion. Renewable energy revenues increased 16% to $ 4 billion. Electricity revenue increased 3% to $ 4.3 billion.
Earlier this year, GE decided to get rid of GECAS, its aircraft leasing business, by combining it with Ireland AerCap Holdings (AER) as part of a larger planned exit from its once powerful lending business. The European Union approved the GE-AerCap agreement on Tuesday. After the deal is signed, GE estimates debt reduction at over $ 70 billion since the end of 2018.
Outlook: GE has raised its estimate of industrial free cash flow for the full year to $ 3.5 billion to $ 5 billion from its April forecast of industrial FCF from $ 2.5 billion to $ 4.5 billion . GE still sees a 2021 EPS of 15-25 cents. Analysts expect GE to earn 25 cents a share.
In a call with analysts on Tuesday, CFO Carolina Dybeck Happe said GE expects the recovery in the global aviation market to accelerate in the second half of the year, margins, aircraft departures and shop visits continuing to improve.
And while GE is monitoring the delta variant of Covid-19, the company is still optimistic about the second half of the year, she added.
Store: Shares rose 3% to 13.31 in Tuesday morning trading, signaling a move above its 50-day line. This could serve as an early entry. GE stock is in a four-month basis with a buy point of 14.51, according to MarketSmith chart analysis. Much of the pattern formed below the 50 day line which is negative. And the line of relative strength is lagging as GE shares have been consolidating since early March.
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Raytheon gains
Estimates: Analysts forecast Raytheon earnings of 93 cents per share, up 132%, as revenues rise 11% to $ 15.83 billion. Wall Street expected $ 775.8 million in free cash flow. In the second quarter of last year, Raytheon bled $ 248 million amid the pandemic.
Results: Raytheon’s profits jumped 164% to $ 1.03 a share with revenues up 11% to $ 15.88 billion. Free cash flow reached $ 966 million from consumption of $ 248 million a year earlier.
Collins Aerospace sales increased 8% to $ 4.5 billion. Pratt & Whitney sales jumped 23% to $ 4.3 billion. Intel and Space sales rose 12% to $ 3.8 billion. Sales of missiles and defense soared 14% to $ 4 billion.
Outlook: Raytheon has full-year adjusted EPS of $ 3.85 to $ 4 and revenue of $ 64.4 billion to $ 65.4 billion. This is an increase from its previous EPS target of $ 3.50 to $ 3.70 on $ 63.9 billion to $ 65.4 billion in revenue. It forecasts an FCF of $ 4.5 billion to $ 5 billion from its previous projection of $ 4.5 billion.
Store: Shares rose 1.45% to 87.20 on Tuesday morning. Raytheon stock forms a flat base with a buy point of 90.08. Like GE stocks, Raytheon sits below the 50 day line with an overdue RS line. But RTX stock is on the verge of recovering its 50-day line, possibly offering early entry.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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