General Electric crushes earnings estimates, inventory rises. But this is not the best part.

The company reported adjusted earnings per share of 27 cents on sales of $13.7 billion in the first quarter of this year and adjusted earnings of 61 cents per share on sales of $17.9 billion in the second quarter of 2022.

Sales and earnings were down year-over-year, but this is the second reported quarter since GE launched the healthcare operation, now known as GE HealthCare Technologies (GEHC), in early January.

All of GE’s business has made progress. In aviation, orders were up 37% year-over-year. Sales increased by 28% while profit margins improved. In General Electric’s gas energy segment, orders grew 7%. Sales were roughly flat, but profits jumped 18% year-over-year thanks to improving margins.

GE’s wind business is still losing money, but it’s losing less money. Moreover, new orders came in at a record $8.3 billion, up from $3.1 billion in the second quarter of 2022. The margin on new orders should be better than it is for the existing business, CEO Larry Kolb said. Barron.

The wind business has been difficult for years. There are even reasons for optimism there.

The improvement is seen in the bottom line numbers. For the full year, GE now expects to earn between $2.10 and $2.30 per share. In April, GE said adjusted earnings for 2023 should fall between $1.70 and $2 per share. The $2.20 midpoint of the new guidance is 35 cents above the old midpoint of $1.85, and the increase of 35 cents is more than the 22 cents by which GE beat its second quarter estimate.

Free cash flow guidance for the full year was also raised. GE now expects to generate free cash flow of approximately $4.3 billion, up from previous guidance requiring about $3.9 billion.

Investors seem happy. Shares rose 4.4% in early trade.

Standard & Poor’s 500

Futures gained 0.1% and

Dow Jones Industrial Average

Futures were flat.

There was a high bar for this earnings report. The arrows caught fire. As trading begins Tuesday, GE shares are up nearly 36% over the past six months, 66% so far this year, and 107% over the past 52 weeks. Improving profitability and free cash flow as well as two large subsidiaries — GE Healthcare and GE Energy Business in early 2024 — are reasons for investors to be more optimistic.

By comparison, another aerospace-focused industrial conglomerate shares,

RTX (RTX) is down about 2% over the past six months, down about 4% year-to-date, and about 3% over the past year.

Just like investors, Wall Street feels good about GE these days. Going into the second-quarter earnings report, analysts were expecting earnings per share of $2.06 for the year, more than 20 cents above the midpoint of the range the company had projected. This is not typical. Analysts generally listen to management teams.

It turns out that the analysts were a little conservative. The new midpoint of the EPS steering range is 14 cents above its mark.

Write to Al Root at [email protected]