By Thomas Gryta 

General Electric Co.'s second-quarter profit dropped 30% from a year earlier as weakness in the company's power division continued to offset growth in other major units.

While the conglomerate backed its 2018 profit goal, it said free cash flow would be at the low end of its previous estimate and reiterated that it will take years to turn around the power division.

The company's adjusted earnings of 19 cents a share for the period beat Wall Street expectations for 17 cents a share, according to Thomson Reuters. Revenue of $30.1 billion also topped consensus projections of $29.3 billion.

GE recently unveiled its roadmap for restructuring under Chief Executive John Flannery, a series of moves to dismantle the company short of a complete breakup of the onetime bellwether. Over several years, GE plans to hive off its Healthcare unit into a separate company and shed its majority holding in oil-and-gas firm Baker Hughes.

GE said Friday that its plan to sell $20 billion in assets is "substantially complete."

"We saw continued strength across many of our segments, especially in Aviation and Healthcare," CEO John Flannery said in prepared remarks, noting that GE cut costs in its industrial divisions by $1.1 billion in the first half of the year.

The company's shares were off 3.2%, or 44 cents, at $13.29 in morning trading.

On a conference with analysts Friday, Mr. Flannery, who took the helm at GE last August, said the company is "meeting or beating our plan in all businesses except for power."

He called that division -- which makes turbines used in power plants to generate electricity -- the biggest challenge facing the company and said the protracted downturn for that market is pressuring cash flow and working capital.

The division's revenue fell 19% from the year-earlier quarter to $7.6 billion on a 26% drop in orders, while profit declined 58%. GE said it is still working on trimming the business, while focusing on servicing its existing customers.

The power division expects to ship 50 gas turbines this year. So far it has sold 19 gas turbines compared with 41 at the same point last year. Orders are usually stronger later in the year, Chief Financial Officer Jamie Miller said, but he noted that some new orders for the massive machines have moved to the second half.

GE is continuing to cut costs in the business and close facilities. Last year, it set plans to cut 12,000 jobs in the division.

"The market is challenging but we need to work through that," Mr Flannery said. "It is going to be a multiyear fix with some volatility."

GE reported second-quarter net income of $615 million, down from $875 million a year earlier. Overall, GE said revenue in the three months ended June 30 rose 3% from $29.1 billion, including a boost from the merger of its Oil & Gas business with Baker Hughes a year ago. GE still owns a majority stake in the combined company.

The company stood by its 2018 earnings projection of $1 to $1.07 a share; it has said it will likely meet the lower end of that range, and analysts currently forecast just 95 cents a share for the year. The estimate was originally given in November when the company revised its long-held target of $2 a share in earnings for 2018.

GE now expects adjusted free cash flow of about $6 billion for 2018, compared with a previous projection of $6 billion to $7 billion. The company still expects to end the year with at least $15 billion in cash.

GE cut its dividend in November for only the second time since the Great Depression, and investors are focused on its ability to generate cash from its operations. In the latest quarter, it had adjusted free cash flow of $258 million from its industrial operations, a jump from the previous quarter's negative free cash flow of $1.7 billion but down from $369 million a year ago.

The company expects restructuring costs of $2.7 billion before taxes for 2018, Ms. Miller said.

As power struggled, profits and sales rose in GE's other two core units, Aviation and Healthcare.

In the aviation business, which manufactures and services jet engines, sales rose 13% and profit grew 7%. Orders at the divisions jumped 29% as demand for its next-generation jet engines remained strong. GE also booked more than $22 billion in new orders this week at the Farnborough airshow in England, it said.

At Healthcare, profit rose 12% to $926 million as revenue grew 6% to about $5 billion.

Profit at GE Capital, the company's financial-services division, dropped 20% to $207 million, while revenue fell 1% to $2.4 billion.

GE continues to contemplate shrinking both the size and risk in the unit. The business has been a source of negative surprises for investors and Mr. Flannery is looking for options to neutralize or exit parts or all of the business, people familiar with the matter say.

Write to Thomas Gryta at thomas.gryta@wsj.com

 

(END) Dow Jones Newswires

July 20, 2018 11:18 ET (15:18 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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