# GE shares slump as supply chain, inflationary woes threaten profit outlook
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-04-26
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: GE Faces Profit Hit Amid Supply Chain Woes and War Fallout
Meta Description: General Electric Co faces challenges from China lockdowns, Ukraine war & supply chain disruptions, impacting profit outlook & shares. Learn more.
URL: https://financedigest.com/ge-shares-slump-as-supply-chain-inflationary-woes-threaten-profit-outlookhtml

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By Rajesh Kumar Singh and Abhijith Ganapavaram

(Reuters) – General Electric Co on Tuesday said fresh COVID-19-related lockdowns in China as well as the war in Ukraine have exacerbated supply chain disruptions and inflationary pressure, putting its full-year profit outlook at risk and plunging its shares.

While the Boston-based industrial conglomerate retained the outlook issued in January, it said the current trends suggest it would hit the lower end of its earnings forecast.

As you’ve been hearing from many other companies, we’re operating in a [challenging macro environment,” Chief Executive Larry Culp told investors](https://www.financedigest.com/ges-investors-seek-solutions-to-renewable-energy-supply-chain-challenges.html "GE’s investors seek solutions to renewable energy, supply chain challenges") on an earnings call.

In January, the company projected adjusted [profit for the year](https://www.financedigest.com/crop-merchant-louis-dreyfus-gets-profit-boost-in-volatile-year.html "Crop merchant Louis Dreyfus gets profit boost in volatile year") to be in the range of $2.80 to $3.50 per share. It also expected to grow its [profit margin](https://www.financedigest.com/inflation-boosts-jeronimo-martins-q4-profit-but-dents-margins.html "Inflation boosts Jeronimo Martins’ Q4 profit but dents margins") by 150 basis points and to generate $5.5 billion to $6.5 billion in free cash flow.

GE’s [shares slumped](https://www.financedigest.com/ubisoft-shares-slump-20-after-french-video-game-maker-warns-on-revenue.html "Ubisoft shares slump 20% after French video game maker warns on revenue") 8.9% at $82.00 in morning trade.

GE said the Russia-Ukraine War, China lockdowns and other supply-chain [issues adversely impacted its revenue in the quarter](https://www.financedigest.com/voice-quality-matters-quarter-of-employees-working-from-home-still-experiencing-regular-connectivity-issues.html "Voice Quality Matters: Quarter of Employees Working From Home Still Experiencing Regular Connectivity Issues") through March by about 6 percentage points.

To mitigate the impact, the company has [raised prices for its products and is invoking price escalation clauses in its service contracts](https://www.financedigest.com/legislate-raises-3-6m-to-give-startups-smes-the-technology-to-query-and-compare-every-contract.html "Legislate raises .6M to give startups & SMEs the technology to query and compare every contract"). It is also trying to find alternative [sources for parts and to improve](https://www.financedigest.com/german-regulator-calls-on-allianz-to-improve-controls-source.html "German regulator calls on Allianz to improve controls – source") productivity to reduce cost.

Yet, it expects the [supply chain](https://www.financedigest.com/minimising-supply-chain-cyber-risks-by-asking-the-right-questions.html "MINIMISING SUPPLY CHAIN CYBER RISKS BY ASKING THE RIGHT QUESTIONS") and inflationary challenges to persist, particularly at its healthcare business, through this year.

Lingering uncertainty over whether U.S. production tax credits for onshore wind [investments will be extended over the long term and soaring costs have spurred customers to delay their projects](https://www.financedigest.com/investing-trends-and-projections-for-2023.html "Investing Trends and Projections for 2023"), resulting in lower orders at its renewable energy business.

Analysts at Wolfe [Research called the company’s comments on the 2022 outlook](https://www.financedigest.com/leprosy-vaccines-market-2021-global-outlook-research-trends-and-forecast-to-2028.html "Leprosy Vaccines Market 2021 Global Outlook, Research, Trends And Forecast To 2028") “disappointing, but not surprising.

We believe the biggest [swings to guidance remain the extent of Renewables losses](https://www.financedigest.com/lloyds-of-london-swings-to-2022-pre-tax-loss.html "Lloyd’s of London swings to 2022 pre-tax loss") and the pace of recovery in Healthcare margins,” they wrote in a note.

Two years into the pandemic that has snarled [supply chains](https://www.financedigest.com/5-steps-to-successful-supply-chain-finance.html "5 Steps to successful supply chain finance") across the globe and driven up costs for everything from labor to raw materials, companies are scrambling to produce enough to feed current demand and also to restock inventory.

Rival Siemens Energy last week said it was reviewing its full-year outlook [amid rising costs at its wind](https://www.financedigest.com/meta-to-wind-down-nfts-on-platforms-amid-crypto-bust.html "Meta to wind down NFTs on platforms amid crypto bust") turbine division Siemens Gamesa, fallout of the war in Ukraine and sanctions imposed on Russia.

GE has suspended its [operations in Russia](https://www.financedigest.com/mcdonalds-to-sell-russia-restaurants-to-local-operator-rebrand.html "McDonald’s to sell Russia restaurants to local operator, rebrand"), which accounts for less than 2% of its overall sales. The company’s power business, however, has a [bigger exposure to the country](https://www.financedigest.com/ecb-weighs-bigger-rate-hike-with-safety-net-for-indebted-countries.html "ECB weighs bigger rate hike with safety net for indebted countries").

On Tuesday, the company said it had recognized $200 million in pre-tax charges in the first quarter due to the [conflict between Russia and Ukraine](https://www.financedigest.com/gorbachev-died-shocked-and-bewildered-by-ukraine-conflict-interpreter.html "Gorbachev died shocked and bewildered by Ukraine conflict – interpreter") and the sanctions.

GE reported higher-than-expected adjusted [profit of 24 cents a share](https://www.financedigest.com/ford-posts-lower-profit-issues-downbeat-outlook-shares-drop.html "Ford posts lower profit, issues downbeat outlook; shares drop") in the quarter through March. Revenue for the quarter came in at $17.04 billion, topping [Wall Street’s](https://www.financedigest.com/asian-stocks-edge-up-before-u-s-jobs-data-defying-wall-street-selloff.html "Asian stocks edge up before U.S. jobs data, defying Wall Street selloff") estimates of $16.89 billion.

The company [burned through $880 million in cash](https://www.financedigest.com/europe-burns-cash-to-help-businesses-in-deepening-energy-crisis.html "Europe burns cash to help businesses in deepening energy crisis") in the first quarter.

(Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; Editing by Louise Heavens, Bernadette Baum and Nick Zieminski)


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