Earnings: GE misses on revenue, JNJ posts mixed results, IBM tops estimates

Yahoo Finance Live's Akiko Fujita and Brad Smith discuss fourth quarter earnings for General Electric (GE), Johnson & Johnson (JNJ), and IBM.

Video transcript

BRAD SMITH: Welcome back to "Yahoo Finance Live," everyone, on a down day for the markets. Some of the companies who have reported earnings this morning today hoping to buck the trend. However, General Electric not able to do that as of right now. Shares are lower by about 6.6%. We're gonna dive into a few companies that we've been keeping our eye on in today's earnings roundup.

And, first, we start things off with GE. For that, I want to bring in Akiko. And, Akiko, what really stands out to you with regard to where and how this company performed? We're taking a look at the actuals versus the estimates there on screen.

AKIKO FUJITA: Yeah. I mean, Brad you look at the share price, down about 6% in the session here. The company did beat on earnings but missed on sales. It also offered cautious guidance, which could be weighing on some of the shares there.

GE posted a profit of $0.92 a share on revenue of just over $20 billion. Looking ahead, though, GE saying they expect to earn about $3.15 a share, generate $6 billion in free cash flow. That growth in free cash flow was the good news. But sales of about $80 billion-- when you look at earnings in the outlook, Wall Street was expecting $4 a share, so coming in a little lower than expected.

The common story that we're hearing-- and I think, specifically, you know I'm looking out for, Brad, here in all these earnings calls, is just how much improvement has been made on the supply chain issues, the company saying they're continuing to be weighed down by those challenges, saying they don't expect to return to sales growth until 2023 with some of the recovery happening in the aviation business.

But, you know, as we were talking about before the show, this is a company that is going through a transformation with that spinoff expected with the energy as sector as well as their aviation health care business. So a bit of good and bad for the company, but, when you look at where the shares are today, investors focusing a bit more on some of that mixed outlook.

BRAD SMITH: Yeah, that's right. And, I mean, you hit the nail on the head with so much of what we're gonna be watching going forward from GE, especially with the revenue growth. They're expecting to return to revenue growth in 2022.

And you mentioned aviation. They actually said on that that they expect aviation revenue to increase more than 20% in 2022. They're citing the continued commercial market recovery on that particular instance and segment of the business here. And so we're gonna continue to track GE shares here on the day after they missed on revenue and with some of those concerns that we laid out their stock moving lower as of right now.

I do want to get into J&J, though, because this is one that I've been keeping an eye on. Early in the trading session, we saw it open lower-- ultimately was able to get into positive territory, holding on to gains as of right now, up by about 1.4%. And, taking a look at some of the actuals versus the estimates for this company in J&J as well, we had seen revenue come in at $24.8 billion and then EPS come in at $2.13.

So you had a slight miss on revenue but a beat on EPS just barely by the hair of a chinny chin chin there. But a few of the things that stuck out to me with regard to this report that came in from J&J-- because I think what is notable here is while the stock opened lower, it's amassed some gains. And one of the reasons we may have seen that initial move lower based on the guidance-- operational sales growth of 7.7% for 2022 versus the 12.8% in 2021, so investors perhaps pricing in a deceleration of growth year over year early in the trading session.

However, there are a lot of positives to take out of this. You saw gains, growth across all categories for J&J. Pharmaceutical sales, that continued to be the Marshawn Lynch, if you will, from his days in the Seahawks, putting the team on his back, if you will, and carrying the load. Over half of the business revenue comes in from this division, so no surprise there.

This is the line of business that accounts for Selara, TREMFYA, as well as the COVID-19 vaccine, too. And then medical devices-- just want to note that. That reported the best growth in full-year results at 18%, but large questions for the company in the future, of course. As they transition, perhaps, into a for-profit business for the COVID-19 vaccine that they've put forward, we'll see exactly where investors try to get some clarity on the timing--

AKIKO FUJITA: Yeah.

BRAD SMITH: --around that going forward, and then, just lastly here, the consumer health division, when that will eventually have the kind of successful spinoff that they were looking for there, and the splitting of that division into its own separate entity and business, which should go forward throughout the rest of this year, and the planning for that.

AKIKO FUJITA: Yeah, I thought it was interesting, the company highlighting also the stronger dollar negatively affected sales by 150 million to 200 million. And, you know, yesterday we were talking about the dollar hitting a two-year high, so an interesting thread to be watching for in other calls, too.

Let's end things with IBM right now. We saw shares up as much as 7% in after hours yesterday. This is the quarter that the company spun out its managed infrastructure business. Revenue for continued operations grew 6%, marking its fastest revenue growth since Q3 in 2011. Net income in Q4 soared 72% year on year.

But going back, Brad, to the labor market and how the companies are being affected, CEO Arvind Krishna saying they are, in fact, facing shortage of workers who have the right set of skills the company is looking for. And they're having to pay up for those workers, although the company said it's gonna take a few more quarters for the impact from those higher wages to trickle down.

BRAD SMITH: Yeah, that's right. And we're taking a look at the segments here, and software continuing to be a major boon for this business, of course. They continue to cite Red Hat up 19% as a kind of subsidiary within that software business and then Hybrid Platform Solutions up 7%, which is included within that software number that we're taking a look at. But infrastructure and financing, we'll see exactly where the management team prioritizes some of the growth efforts within that part of the broader IBM consortium of businesses that they do have.

But Big Blue ultimately here on the day, keeping a close eye on shares of IBM. And we'll see how they're continuing to do, especially in spite of some of the movement that we've seen on the broader markets lower here on the day. As of right now, IBM stock's still holding onto gains of about 2.4%