GE and 3M Lead Worry Parade on the Economy

Soothing words on the economy were in short supply on a jam-packed day for industrial earnings reports on Tuesday.

General Electric Co. and 3M Co. both technically left their full-year guidance for their underlying businesses intact but buried the outlooks in a grab bag of concerns. Executives insist that demand remains healthy. “I can’t say that an industrial recession is high on my worry list today,” GE Chief Executive Officer Larry Culp said in an interview. Concerns about rising interest rates and China’s Covid policies are understandable, but “we don’t have a demand challenge. We have a challenge fulfilling those customer requirements.” Still, both GE and 3M used the words “uncertain” and “uncertainty” liberally during their earnings calls, and the tone was more tempered than it was in January, when industrial companies broadly predicted an easing in supply chain and inflation pressures as the year progressed.

At GE, inflation, lingering supply chain disruptions and the impact of Russia’s invasion of Ukraine are weighing on earnings and cash flow, and the company is now trending toward the low end of its outlook. GE also flagged the burgeoning Covid lockdowns in China as an additional watch item, particularly for its aviation and health-care businesses. A loss of $434 million for the renewable energy unit in the quarter amid rising costs and lower volumes is particularly outsize relative to the company’s forecast for a $500 million to $700 million loss for the entire year, and GE now expects to fall short of that target. Barclays Plc analyst Julian Mitchell called out the surprising lack of share repurchases in the first quarter despite a $3 billion authorization announced in early March and recent weakness in GE’s stock price.