GE Stock Bounces on Surprising Profits, Bounces on Cash Flow; CEO hails “accelerating transformation”


General Electric (GE) avoided an outright loss in the third quarter as GE’s profit and revenue exceeded views. Industrial free cash flow turned solidly positive and continues to improve in the fourth quarter even as the coronavirus pandemic continues to hit global commercial air travel. GE stock rose sharply before the opening.


Gains GE

Estimations: Analysts expected GE to hit a net loss of 6 cents per share against EPS of 15 cents a year ago. Revenue fell 18% to $ 19.15 billion, according to Zacks Investment Research.

Results: GE profits fell 60% to 6 cents a share as sales fell 17% to $ 19.4 billion. Aviation revenues fell 39%, with healthcare revenues down 7%. Power segment revenue increased 3%, renewable energies up 2%.

Orders fell 31% from a year earlier to $ 15.5 billion, although it was $ 13.8 billion in the second quarter. Organic orders fell 28%.

Industrial free cash flow was $ 514 million, down 21% from a year earlier, but a welcome change from the first half of the year.

Chairman and CEO Larry Cup said in GE’s earnings statement: “As our work continues, GE’s transformation accelerates and we expect industry free cash flow to be at least $ 2.5 billion in the fourth quarter and positive in 2021. ”

GE spent $ 4.3 billion on cash in the first half of 2020, due to weak commercial aviation business. In the second quarter earnings call on July 29, Culp warned that “the macroeconomic environment could deteriorate further” and forecast a long recovery in aviation.

In September, CEO Larry Culp said he saw positive free cash flow in the second half of the year and continued into the next year. This was earlier than previous estimates for 2021, and GE’s stock has skyrocketed.

Tuesday, jet engine rival Technologies Raytheon (RTX) announced larger cuts as aviation sales fell, although profits still exceeded estimates.

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Stock GE

General Electric shares jumped 4.4% to 7.44 on the stock market today. GE stock is working on a buy point of 8.67 on a cup basis which is part of a larger and much deeper consolidation. But the industrial giant encountered resistance at the 200 day line, a negative sign. Raytheon plunged 0.9% before the open. Honeywell (HON), which reported on Friday, fell more than 2% as futures contracts on Dow Jones were significantly lower.

In 2018, General Electric embarked on a multi-billion restructuring after a tough period for profits.

GE stock rebounded strongly in 2019 on hopes of a recovery under Culp. Then the Boeing (BA) The 737 Max crisis and the coronavirus pandemic have struck, slamming the jet engine maker. GE Aviation cut its workforce by around 25% earlier this year.

In July, GE reported a second quarter loss of 15 cents a share, a penny worse than views. The CEO also warned of a long recovery in aviation.

The question of GE and its transformation continues to divide Wall Street.

In August, JPMorgan became “more negative” on GE, calling the Covid-19 vaccine “essential” for its survival. A vaccine could improve public sentiment about air travel.

But in October, Goldman Sachs resumed hedging GE stocks with a buy rating and price target of 10. Core businesses may have bottomed out and could recover from the worst of the pandemic, the pandemic said. society.

Also this month, Moody’s warned that GE’s recent receipt of a Wells advisory highlighted the lingering liability risks associated with a traditional insurance business.

GE’s healthcare activities have offset pain in other units amid the pandemic.

Find Aparna Narayanan on Twitter at @IBD_Aparna.


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