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General Electric Co on Tuesday pegged its full-year earnings at the lower end of its previous forecast as the U.S. industrial conglomerate was dogged by persistent supply chain disruptions and rising freight and raw material costs.
Two years into the pandemic that has snarled supply chains 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.
Fresh COVID-19-related lockdowns in China as well as Russia's invasion of Ukraine have only worsened the situation.
"We're holding the outlook range we shared in January, but as we continue to work through inflation and other evolving pressures, we're currently trending toward the low end of the range," said Chief Executive Larry Culp.
In January, the company projected adjusted profit for the year to be in the range of $2.80 to $3.50 per share. It also expected to grow its profit margin by 150 basis points and to generate $5.5 billion to $6.5 billion in free cash flow.
Shares were down about 3.5% at $86.77 in premarket trading.
Analysts at Wolfe Research called the company's comments on the 2022 outlook "disappointing, but not surprising."
"We believe the biggest swings to guidance remain the extent of Renewables losses and the pace of recovery in Healthcare margins," they wrote in a note.
GE said revenue growth at its healthcare unit was hit by lockdowns in China and lower volumes in Russia and Ukraine. The aviation segment was navigating through the lockdowns but demand was expected to remain strong, the company added.
Meanwhile, soaring costs have spurred customers to delay their projects, resulting in lower orders at its renewable energy business.
Rival Siemens Energy last week said it was reviewing its full-year outlook amid rising costs at its wind turbine division Siemens Gamesa, fallout of the war in Ukraine and sanctions imposed on Russia.
GE has suspended its operations in Russia, which accounts for less than 2% of its overall sales. The company's power business, however, has a bigger exposure to the country.
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 and the sanctions.
GE reported higher-than-expected adjusted profit of 24 cents a share in the quarter through March. Revenue for the quarter came in at $17.04 billion, topping Wall Street's estimates of $16.89 billion.
The company burned through $880 million in cash 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)