GE Swings to Quarterly Profit as It Shrinks--2nd Update
30 Abril 2019 - 7:33AM
Noticias Dow Jones
By Thomas Gryta
General Electric Co. swung to a first-quarter profit as the
conglomerate reported stronger cash production than expected while
leaving its full-year expectations unchanged.
GE's core industrial businesses burned through $1.2 billion of
cash in the quarter; the company warned earlier this year that cash
flow would drop as much as negative $2 billion this year from its
core industrial operations.
It has called 2019 a "reset year" but has warned that the first
quarter would be the low point of the results. New CEO Larry Culp
is restructuring the company, prioritizing the struggling Power
division as well as reducing the conglomerates massive debt
load.
In the first quarter, GE reported a profit of $3.55 billion,
compared with a year ago loss of $1.18 billion. Revenue fell 2% to
$27.29 billion, as a sharp decline in the Power division, which
makes turbines for power plants, offset gains in Aviation and other
units.
"Our quarterly results were better than our expectations,
largely driven by timing of certain items, which should balance out
over the course of the year," Mr. Culp said in a statement. "This
is one quarter in what will be a multiyear transformation."
In the quarter, GE completed the sale of its century-old
locomotive business, struck a more than $20 billion deal to sell
its biotechnology business and paid $1.5 billion to settle a
long-running Justice Department probe into a legacy subprime
mortgage lending business.
Investors and analysts see cash production as a strong measure
of a company's performance and value. For GE, which has all but
eliminated its dividend, the goal is returning to sustainable cash
flow. But like many things at GE in recent years, the company's
complexity makes it difficult to assess performance around a single
financial metric.
GE expects to report positive cash flow in 2020, but a slide for
its conference call shows the Power division isn't expected to
produce cash until 2021.
Analysts had varying expectations for the company's performance
in the quarter. RBC Capital analyst Deane Dray estimated negative
cash flow of $4 billion and Gordon Haskett analyst John Inch
projected cash burn of $2.5 billion. JPMorgan analyst Stephen Tusa
estimated a negative $3 billion.
Adjusted quarterly earnings per share were 14 cents, ahead of an
analyst projection of 9 cents a share, according to Refinitiv,
while revenue was slightly above the consensus view of $27.05
billion.
GE shares rose about 8% to $10.52 in pre-market trading Tuesday.
The stock has surged about 34% this year, but is down 30% in the
last 12 months. Two years ago, GE shares traded at close to
$30.
The Power business eked out a small profit even as revenue fell
22% from a year ago to $5.66 billion. GE has been restructuring the
unit, which has struggled with slack demand for power plant
equipment and excess inventories. GE said orders fell 14% in the
latest quarter but rose in the gas side of the business.
The division, which had been GE's biggest in terms of revenue,
has been at the center of GE's financial and operational woes. The
company recorded a $22 billion accounting charge last year mostly
related to its acquisition of Alstom SA's power business in
2015.
The Aviation unit, which make jet engines used by Boeing and
Airbus, reported $1.66 billion in quarterly profit as revenue rose
12% to nearly $8 billion, making it GE's biggest and most
profitable unit. The business shipped more than 400 LEAP engines in
the quarter, more than twice as many as in the year-ago
quarter.
Regarding the grounding of Boeing's 737 MAX airliners, GE said
it is working closely with authorities but didn't provide details
around any financial impact. It described the issue as "a new risk"
to its 2019 outlook.
GE's CFM joint venture with Safran SA makes engines for the 737
MAX and Safran recently warned of cash-flow delays related to the
plane's troubles.
The Healthcare unit had a quarterly profit of $781 million on
flat revenue of $4.68 billion. GE is selling off the fast-growing
biotech side of the operations, using the proceeds to help pay down
debt. That will leave behind a business focused on selling hospital
equipment such as MRI machines.
GE Capital ended the first quarter with $122 billion of assets.
GE has been shrinking the once massive lending operation, which
still includes a large jet leasing business and legacy insurance
business. The unit had a profit of $135 million from continuing
operations in the quarter and GE has said it will have to pump $4
billion into the unit this year.
Write to Thomas Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
April 30, 2019 08:18 ET (12:18 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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