GE Exceeds Our Expectations
The second quarter's strong performance should be a prelude to a strong showing for the next several quarters.
General Electric (GE) delivered strong earnings in the second quarter, exceeding our expectations on the back of better-than-expected performance out of GE Capital but offset by weakness in GE Energy. We are maintaining our fair value estimate share and our long-term thesis remains intact.
While we are encouraged by GE's strong performance, 17% organic order growth in the quarter across the industrial businesses gives us confidence that GE is at the front end of strong growth in its end markets. Renewable energy has been particularly unkind to earnings during the last several quarters as volumes declined materially and pricing evaporated, leaving all firms in the wind and solar supply chain financially weaker. Management noted that renewable markets likely have bottomed, with strong order growth, albeit at lower margins than the last cycle, underscoring the market reversal.
Daniel Holland does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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