Shares of industrial giant General Electric declined by 18.7% in June, according to data provided by S&P Global Market Intelligence. While the overall market was weak in June, GE’s underperformance speaks to the market’s fears over the industrial company’s prospects in 2022. 

What’s going on

In the first-quarter profit call, the executives at GE said it was moving toward the low end of its full-year guidance due to supply chain pressures in its aviation, healthcare, and renewable energy segments.

Assuming GE will lower its earnings expectations in 2022, it calls into question the smooth flow of the breakup plan.

GE plans to spin off GE Healthcare in early 2023 and then spin off a combination of GE Power and GE Renewable Energy in early 2024. So, on the off chance that GE and GE Healthcare’s profits are in danger in 2022, it might affect the level of debt GE Healthcare will be spun off with — companies are typically loaded with debt in line with their earnings. 

What now?

The ongoing supply chain problems are a concern, and GE management has already told investors that GE Renewable Energy wouldn’t meet management’s initial expectations for 2022.

That said, GE’s valuation is now such that it can probably tolerate a moderate reduction in guidance.

GE will deliver its second-quarter profit report on July 26. Everyone’s eyes will be on the administration’s analysis of end markets and direction.