General Electric (GE) on April 29 reported a steep drop in first-quarter revenue, with the industrial giant—like many companies—taking a major hit from the coronavirus pandemic.
The company reported a year-over-year revenue decline of 8%, with posted revenue of $20.524 billion, and noted a $1 billion negative impact to cash flow during the quarter. The company earned 5 cents on an adjusted per-share basis, below the Refinitiv estimate of 8 cents per share.
The impacts of COVID-19 caused revenue to fall 13% in both the Power and Aviation divisions. Profit in aviation fell 39% to $1 billion, while the power unit lost $129 million, according to the company.
“The impact from COVID-19 materially challenged our first-quarter results, especially in Aviation, where we saw a dramatic decline in commercial aerospace as the virus spread globally in March,” CEO Larry Culp said in a statement Wednesday.
JPMorgan analyst Stephen Tusa in a note to clients wrote, “This is a worse than expected result, visibility on how bad this could be is still evolving, and all the mechanisms that this company had continued to use in 2019 as a crutch for industrial results are becoming unmasked. The quarter itself was an across the board miss on almost all fronts, and unlike the past, there was no wiggle room below the line on tax or corporate … to offset.”
The company’s health-care segment saw revenues increase by 7% to $5.292 billion, with profit growing to $896 million, up from $781 million in 1Q2019. The company cited “surge demand for products used in the diagnosis and treatment of COVID-19.”
Culp on Wednesday said, “While there are many unknowns, there will be another side—planes will fly again, health care will normalize and modernize, and the world still needs more efficient, resilient energy. We’re embracing today’s reality and accelerating our multi-year transformation to make GE a stronger, nimbler, and more valuable company.”
13% Drop in Power Division Revenue
GE’s Power division reported a 13% drop in year-over-revenue, to $4.025 billion, down from $4.617 billion in the first quarter of 2019. The company reported an increase in orders, though, up 12% year-over-year.
The company said it received orders for nine gas turbines, including two HA units, and three aeroderivative units. It said Power Portfolio orders increased 27%, “with strong equipment orders in Steam Power and Power Conversion.”
The company said revenue from its Renewable Energy unit increased 26% year-over-year, to nearly $3.2 billion, up from about $2.5 billion in 2019, though orders fell 13% year-over-year.
GE said about 20% of planned maintenance work on power plants had been deferred until later this year, which weighed on revenue and profit. Several U.S. utilities, many of which use GE equipment, are deferring non-essential work because of health and safety restrictions due to the coronavirus pandemic.
Aviation Business Hammered
GE’s aviation business noted a revenue drop of 13% to $6.892 billion on a year-over-year basis in the first quarter, with the division’s profit falling 39% to $1.005 billion from $1.66 billion. Orders declined by 14%.
Culp said the company is still considering cost cuts of more than $2 billion, along with $3 billion in cash preservation, in an effort to lessen the impact of the pandemic. The company also expects business conditions will be worse in the current quarter.
“The second quarter will be the first full quarter with pressure from COVID-19, and GE expects that its financial results will decline sequentially,” the company said.
The Aviation division earlier this month announced it would furlough half the unit’s engine manufacturing workers, idling thousands of staff for as much as four weeks. The announcement came a few weeks after the company said it would cut 10% of the workers in that unit, or about 2,600 jobs.
GE earlier this month announced it was withdrawing its 2020 forecast. The company also said its cash and cash-equivalent holdings topped more than $47 billion, along with a revolving debt facility of $15 billion as it tries to ride out the virus-induced downturn.