GE falls to 17-month low after earnings reveal inflation and supply-chain challenges are weighing on industrial giant's profit outlook
- GE stock slid 13% on Tuesday after the industrial conglomerate issued weak profit guidance.
- The company said inflationary and supply-chain issues were weighing on its 2022 outlook.
General Electric shares tumbled more than 10% on Tuesday, slammed lower after the nearly $100 billion industrial conglomerate offered a soft profit outlook on inflationary and supply-chain issues.
The company, whose operations range from producing aircraft engines, wind turbines and healthcare equipment, said it sees its 2022 profit coming in at the lower end of its previous guidance. GE in March had projected adjusted earnings of $2.80 to $3.50 a share.
The stock fell as much as 13% to $78.41, the lowest price since late-November 2020. Volume was heavy, with nearly 18 million shares exchanged by the afternoon outstripping the average daily volume of 6.2 million.
"We are holding the outlook range we shared in January, but as we continue to work through inflation and other evolving pressures, we're currently trending at the low end of the range," Larry Culp, GE's CEO and chairman said in its first-quarter earnings report.
GE flagged inflationary pressures at a time of soaring consumer and producer prices, stemming in part from surging energy costs. US annual producer prices in March jumped 11.2%, the largest increase on record, and headline inflation accelerated 8.5% in March, the fastest increase since December 1981. A range of energy costs has jumped since the late-February invasion of Ukraine by Russia.
While margins at its aviation and power businesses "improved substantially," GE said the ones for its healthcare and renewables operations were "meaningfully pressured due to both inflation and supply chain shortages."
It noted in the earnings report that supply chain problems weighed on its commercial engines business. The healthcare area was also weighed by that factor as well as by lower volumes stemming from the Russia-Ukraine war and China's latest wave of COVID outbreaks.
Culp said collectively, supply chain issues, the Russia-Ukraine war, and coronavirus lockdowns in China hurt affected quarterly revenue by about six percentage points.
GE shares in 2022 through Monday's session had dropped by nearly 5%.