Aviation Rivals Flash Early Entries On Strong Earnings, Cash Flow

General Electric (GE) beat earnings estimates for the second quarter Tuesday while reporting positive cash flow and cash flow guidance. Aviation rival Raytheon Technologies (RTX) also topped profit and cash forecasts. GE stock xx and Raytheon stock rose early Tuesday, signaling moves above key levels as they near buy points.


Results for the jet-engine makers come as airlines order more planes to meet rebounding travel demand, while Boeing (BA) is ramping up deliveries of its 737 Max after an extended pause. But resurgent Covid-19 infection rates could complicate the aviation sector’s outlook.

GE Earnings

Estimates: Wall Street expected GE to swing to EPS of 3 cents from a loss of 15 cents per share a year ago. Revenue was seen growing 2% to $18.14 billion, according to FactSet.

In addition, analysts forecast a Q2 cash burn of $338.3 million, improving both sequentially and year upon year. In the year-ago Q2, GE disclosed negative free cash flow from industrial operations to the tune of $2.068 billion.

Results: GE earnings came in 5 cents a share as revenue grew 8.9% to $18.3 billion.

Industrial cash flow came in a positive $400 million.

Earlier this year, GE moved to shed GECAS, its aircraft-leasing business, combining it with Ireland’s AerCap Holdings (AER) as part of a wider planned exit from its once-mighty lending business. The European Union approved the GE-AerCap deal on Tuesday.

Outlook: GE raised its industrial free cash flow estimate for the full year to $3.5 billion to $5 billion vs. its April guidance of industrial FCF of $2.5 billion to $4.5 billion. GE still sees 2021 EPS of 15-25 cents. Analyst expect GE earnings of 25 cents a share.

Stock: Shares popped 4.2% to 13.46 in early Tuesday stock market trading, signaling a move above its 50-day line. That could serve as an an early entry. GE stock is in a four-month base with a 14.51 buy point, according to MarketSmith chart analysis. Much of the pattern has formed below the 50-day line, which is a negative. And the relative strength line has been lagging as GE stock consolidates since early March.

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Raytheon Earnings

Estimates: Analysts forecast Raytheon earnings of 93 cents a share, up 132%, as revenue grows 11% to $15.83 billion. Wall Street expected $775.8 million in free cash flow. In the year-ago Q2, Raytheon bled $248 million amid the pandemic.

Results: Raytheon earnings spiked 164% to $1.03 a share with revenue up 11% to $15.88 billion. Free cash flow came in $966 million vs. a cash burn of $248 million a year earlier.

Outlook: Raytheon sees full-year adjusted EPS of $3.85-$4 and sales of $64.4 billion to $65.4 billion. That’s up from its prior EPS target of $3.50-$3.70 on $63.9 billion to $65.4 billion in revenue. It sees FCF of $4.5 billion to $5 billion vs. its prior projection of $4.5 billion.

Stock: Shares rose 1.7% to 87.40 early Tuesday. Raytheon stock is forming a flat base with a 90.08 buy point. Like GE stock, Raytheon sits below the 50-day line with a lagging RS line. But RTX stock is set to reclaim its 50-day line, perhaps offering an early entry.

Find Aparna Narayanan on Twitter at @IBD_Aparna.


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