(Bloomberg) -- General Electric Co. is trending toward the low end of its financial forecast for the year as it grapples with supply-chain turmoil and spiking raw material costs.
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While the maker of jet engines and gas turbines maintained its 2022 guidance of adjusted earnings in the range of $2.80 to $3.50 a share, it cited new pressures including pandemic-related restrictions in China and the war in Ukraine. Analysts had expected $3.24 on average, according to estimates compiled by Bloomberg.
“It is as challenging a macro backdrop as I think I’ve ever seen,” Chief Executive Officer Larry Culp said Tuesday in an interview. The company had anticipated a slow start to the year, he added, noting that revenue growth would have been about six percentage points higher had it been able to get all of its orders out the door.
GE is keeping an eye out for further supply chain constraints, though “I think we’re going to continue to make progress through the year,” Culp said.
See also: Raytheon cuts sales forecast due to Russia sanctions
The comments underscore the difficulty GE faces as it tries to regain its footing amid a snarled supply chain, rising material costs and labor challenges -- factors that had already led the company to rein in expectations for the beginning of the year. GE will need to lean heavily on its performance in the second half to achieve its financial targets.
The shares declined 3.5% at 8:01 a.m. in New York before regular trading. The stock fell 4.9% this year through Monday’s close, compared with a 9.9% decline in the S&P 500.
The forecast took the shine off a quarter in which it posted profit above Wall Street’s expectations. Adjusted earnings were 24 cents a share in the first quarter, according to a statement, compared with the 20-cent average of analysts’ estimates.
Free cash flow -- a closely-watched measure of earnings power -- was negative $880 million, slightly worse than the $839.3 million outflow that analysts expected in the period, typically GE’s weakest based on the seasonality of its businesses.
Orders at GE Aviation rose 31% as the commercial aerospace industry continued to rebound from the pandemic. While the company anticipates continued strong demand, it said the commercial engine business fell double digits in part because of supply-chain challenges.
Sales at GE Healthcare gained only 1% as parts shortages hobbled delivery of medical scanners, while GE’s renewable energy division struggled with weak near-term demand for wind turbines in the U.S., with a 12% decline in sales.
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GE took a roughly $200 million pretax charge related to Russia’s invasion of Ukraine, primarily linked to impairments of receivables, inventory and other items.
The various challenges have added complexity to Culp’s efforts to improve financial and operational discipline at the Boston-based conglomerate ahead of a breakup. GE will split into separate aviation, health and power businesses, starting with the planned spinoff of GE Healthcare early next year.
GE said Tuesday that it remains on track with the breakup plan.
(Updates with CEO comment in third paragraph)
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