General Electric Provides Long Term Outlook That Has Investors Cheering

02:20 03/16/2019

Shares of General Electric GE  were moving higher on Thursday in premarket trading after CEO Larry Culp had some positive things to say to CNBC's Morgan Brennan.

Culp said, 'We will have a greater level of negative cash flow in [the power] business this year.'

Culp said it's 'game on' for this year. “From there will get significantly better in 2020, and we expect positive free cash flow in 2021,” Culp added.

The company recently revised its 2018 earnings on an adjusted basis, to 53 cents a share, down from 65 cents a share. On a GAAP (nonadjusted) basis, GE revised total 2018 revenue to $105.2 billion from $113.6 billion.

The company has forecast full-year 2019 earnings in the range of 50 to 60 cents per share, coming in shy of the Street consensus forecast of 70 cents a share. The company said that it adjusted industrial free cash flow burn could reach $2 billion, but said that figure will turn positive by 2020.

Culp said during the company's outlook broker conference call this week, 'It's really been about getting into the granular operating detail with each of our businesses. Bottoms up, if you will. We will continue to share information about our company as we have a clear view of it. It's that simple. I mean, you've seen this in our recent communications, including a simpler 10-K that includes more detail and the Insurance Teach-in we held last week. That approach will continue today and going forward.'

He continued, 'We are working diligently to return GE to a position of strength, and I am confident that we will do that. This is a team that is very mindful of where we are. We do not need any convincing that we can and should be better. We're determined to do the hard work of running this company differently over time. We have leading technologies and growing markets and will spend some time talking through the environment in those markets in a little bit.'

'Our vast and valuable installed base keeps us intimately involved with our customers. And let me assure you, having spent a lot of time with them, that our customers are rooting for GE. These relationships and the scale of the network GE has built around the world continues to be a unique competitive advantage. We also face a number of challenges, and let me touch upon two of the largest. First, simply put, we have too much debt, and we need to reduce it thoughtfully and quickly. We have taken meaningful steps here, such as the recently announced Biopharma deal, which are putting GE on firmer financial footing. Second, at Power, as we described to you on our last earnings call, we understand the root causes of our underperformance in 2018. We continue to adjust to market realities, move past some nonoperational headwinds and improve on our execution issues,' added the CEO.

He further said, 'It's clear that we have work to do. Some of it, including the day-in and day-out work of improving daily operations and how we manage cash, will take time to be reflected in our financial results. But it's work we can do. From the outside, it might be harder to see, but as someone who has spent the last 5.5 months conducting a dispassionate analysis into every corner of GE, it's as clear as day to me. And I should add the story is not just about Power. I'm encouraged because we have leading products and technologies in each of our businesses, and we see an opportunity to manage them better. We have significant upside, especially on cash conversion over the long term. Last year, our 4 industrial businesses collectively yielded mid-single-digit cash on sales. Strong businesses like these can all be better cash generators. You'll hear about Aviation from David in a few minutes, but that is a business with solid cash flow yields. Healthcare, too. Both businesses are robust and where we should expect continued healthy cash flow conversion.'


This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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