General Electric (GE) earnings for the second quarter of 2022

A photo taken on July 18, 2022 shows the GE9X General Electric engine on a Boeing 777 during the Farnborough Air Show in Farnborough.

Justin Thales | AFP | Getty Images

General Electric on Tuesday surprised Wall Street with higher quarterly earnings and positive cash flow as a recovery in the aviation industry propelled its jet-engine business, sending its shares higher in pre-market trading.

The Boston-based industry group reiterated that its full-year results were on track to meet the minimum expectations due to an ongoing supply chain and inflationary pressures. However, it trimmed its full-year free cash flow forecast by nearly $1 billion.

“Working capital will come under pressure as GE protects customers from the impact of supply chain challenges, as well as demands related to renewable energy,” the company said.

GE added that the pressure would see about $1 billion in free cash flow pushed “into the future.”

In January, it forecast adjusted earnings in 2022 to be in the range of $2.80 to $3.50 per share, and is expected to generate $5.5 billion to $6.5 billion in free cash flow.

Shares of General Electric rose 3.9% to $70.99 in pre-sale hours.

The strong rebound in air travel has boosted demand in GE’s motor business, which is the company’s profitable cow. The unit posted a 27% year-over-year jump in revenue in the quarter ending June on the back of higher store visits and parts sales.

The company expects demand in its air unit to remain strong, resulting in revenue growth of more than 20% and $3.8 to $4.3 billion operating profit this year.

Raytheon Technologies, whose segment makes Pratt & Whitney jet engines, has reported a jump in demand for its engines and aftermarket services.

However, GE’s healthcare unit earnings are expected to be impacted this year due to supply chain disruptions, freight and raw materials inflation.

These issues, along with the expiration of the US tax credit for wind power production, have affected the company’s renewable energy business. As a result, GE said it no longer expects an improvement in its business in the second half of the year.

Adjusted profit for the June quarter came in at 78 cents a share, well above analysts’ expectations of 38 cents a share, according to Refinitiv. Quarterly revenue of $18.6 billion also beat Wall Street estimates.

The company reported $162 million in free cash flow in the second quarter.

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