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We are only a quarter of 2019, but GE seems already on the verge of fighting to stabilize its cash flow as it has done for most of last year.
GE said Tuesday that its free industrial cash flow – a figure closely monitored by Wall Street to gauge the health of the industrial giant – represented a $ 1.79 billion outflow in the first quarter. A year ago, GE's free industrial cash flow represented a $ 1.77 billion outflow.
On an adjusted basis, GE said its free cash flow was an outflow of $ 1.2 billion.
Many on Wall Street were looking for a cash outflow of about $ 2 billion during the quarter.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "At a meeting with investors in MarchGE CEO Larry Culp has promised that free industrial cash flow would be down $ 2 billion and stagnate this year. "Data-reactid =" 26 "> At a meeting with investors in March, GE CEO Larry Culp promised that the free cash flow from manufacturing would decrease by $ 2 billion. then it is in "positive territory" in 2020 and then accelerates in 2021.
The tepid Q1 liquidity index – while outperforming analysts' forecasts – leaves GE in a hole compared to Culp's forecast. GE ended the first quarter with cash and cash equivalents of $ 73.2 billion, up from $ 68.7 billion a year ago.
For GE, persistent free cash flow under pressure is a by-product of ongoing struggles in most areas of its business, including the key electricity sector. GE saw its operating profit margins decline in two of its six business segments in the first quarter (aviation and electricity). The renewable energy sector lost $ 162 million from a profit of $ 77 million a year ago.
Health care remains GE's flagship business – the operating margin improved by 110 basis points, driven by higher sales of equipment and services.
Investors chose to ignore the generally poor free cash flow in the beginning and focus on GE's earnings and cash flow. GE's first quarter adjusted earnings were 13 cents per share compared to Wall Street's estimates of 9 cents a share.
Shares rose 5.7% in pre-market transactions.
Even so, GE acknowledged that its "better than expected" performance during the quarter was "largely" motivated by the "timing of certain items". Culp said his performance for the rest of the year would be more in line with his recent forecast. Meanwhile, Culp reiterated that 2019 would be a "reset year" for GE.
Place your bets accordingly, investors.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Brian Sozzi is a senior editor at Yahoo Finance. Follow him on Twitter @BrianSozzi"data-reactid =" 34 ">Brian Sozzi is a senior editor at Yahoo Finance. Follow him on Twitter @BrianSozzi
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