General Electric Co. reported stronger profits with cost cuts offsetting lower-than-expected sales of its industrial equipment in the September quarter, as the manufacturer felt the pinch of global supply disruptions.
Revenue increased in the company’s jet engine business as air travel rebounded from the start of the pandemic, but sales declined in its healthcare business amid product shortages. GE’s renewables division also booked a sales drop while the power business was flat.
GE’s quarterly profit came ahead of Wall Street’s expectations and the maker raised its earnings targets for the full year. It also narrowed its forecast for free cash flow from its industrial business, a closely watched metric.
GE said 2021 revenue will be flat, down from the previous outlook for growth by a low-single-digit percentage. The company forecast growth in revenue, cash flow, and profit margin for 2022, but said it would provide more details at a later date.
In the third quarter, orders increased for both services and equipment in each GE division, compared to a year-ago period when the Covid-19 outbreak curtailed economic activity.
GE’s healthcare division has been a bright spot this year, but the company said shortages hampered growth in the latest quarter. Business sales fell 5% to $4.34 billion; GE said sales would have grown 4% if the company had filled all of its orders for MRI machines, CT scanners, and other hospital equipment.
Share-price performance has lagged that of rivals but GE’s debt load is much lower than asset sales. It is shedding most of its jet-leasing business in a deal that is now expected to close next week, sooner than previously thought. The deal with AerCap Holdings NV is expected to bring in $24 billion in cash by the end of the year, helping cut GE’s debt load by more than $75 billion over three years.
In a sign of GE’s confidence in improving its financial position, the company made two small health care acquisitions in the past year and recently agreed to buy medical-imaging company BK Medical for $1.45 billion in cash.
GE narrowed its 2021 industrial cash flow forecast to $3.5 billion to $5 billion from a previous view of $3.5 billion to $4.75 billion. It now expects earnings of $1.80 to $2.10 per share by 2021, up from the previous range of $1.20 to $2 per share.