General Electric (GE) shares edged higher Wednesday after CEO Larry Culp said the industrial group is seeing robust demand from its customer base, but cautioned that supply-chain bottlenecks remain its most significant challenge.
Speaking to the Bernstein Strategic Decisions conference in New York, Culp said delivering products to customers is a much greater challenge than finding end demand, although price remains an "imperative" for companies around the world.
Earlier this year, Culp said supply chain demand and inflation pressures were likely to persist into the current quarter, noting the full-year profit forecast will is trending towards the lower end of its January guidance.
Culp added that the industrial group remains focused on cost cuts, with a $2 billion 'gross cost out target' for 2022, through "productivity, restructuring & sourcing actions," according to a GE presentation.
Supply chain and cost pressures are likely to last into at least the second half of the year, GE said in March, noting that the "magnitude" of these challenges would pressure growth profit and free cash flow growth as well.
General Electric shares were marked 0.5% higher in early Wednesday trading to change hands at $78.70 each, a move that would leave the stock with a year-to-date decline of around 17%.
GE posted better-than-expected first quarter earnings in late April, while confirming its full-year profit guidance, saying it expects adjusted earnings in the region of $2.80 to $3.50 per share for the full year -- albeit at the lower end -- while generating free cash flow in the region of $5.5 billion to $6.5 billion, a figure that will improve to $7 billion in 2023.
The group also noted it's on track to split the iconic group into three separate 'investment grade' companies, a plan that was unveiled last year and marks one of the most significant changes in the industrial giant's 130-year history.
General Electric will form three different companies -- focusing on energy, healthcare and aviation -- with current CEO Larry Culp tabbed as non-executive chairman of the developing healthcare group -- which will be run by Peter Arduini -- when it is spun-off in 2023.
