Vladimir Zernov
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General Electric

General Electric Video 10.03.21.

General Electric Stock Falls After Company Cuts Earnings Guidance

Shares of General Electric found themselves under pressure after the company announced that its full-year earnings per share would be $0.15 – $0.20 compared to its previous guidance of $0.15 – $0.25.

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The stock was moving higher ahead of the company’s Investor Day so the market expected that the company’s actual results in 2021 would be closer to the higher end of the original guidance. In this light, the new guidance served as a material bearish catalyst for the stock.

In addition, the company recommended a 1-for-8 reverse split in order to decrease the number of shares outstanding. At 8.77 billion, General Electric’s share count is huge, so this move makes sense.

Traders are also taking a close look at the company’s decision to combine its GE Capital Aviation Services with AerCap, whose stock has recently gained ground on rumors about the upcoming deal.


What’s Next For General Electric?

Assuming that General Electric meets its earnings guidance in 2021, its stock is currently trading at a forward P/E for 2021 of  65 – 87. Analysts expect that the company’s performance will materially improve in 2022 and 2023, but they may be pressed to revise their forecasts after the recent guidance cut.

Shares of General Electric have been steadily moving higher in 2021, so the market was not prepared to hear any disappointing news as it looked like the company was headed in the right direction.

The AerCap deal may be serving as an additional negative catalyst in the near-term as the deal is complex and General Electric may need time to get positive results out of this combination. In addition, the deal will likely have to go through some regulatory hurdles which may take up to a year.

At the same time, the stock has pulled back materially from recent highs and may attract those traders who missed the recent upside move and were waiting for such an opportunity.

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