General Electric (NYSE:GE)
Historical Stock Chart
3 Months : From Oct 2019 to Jan 2020
By Thomas Gryta
General Electric Co. reported a more than $9 billion third-quarter loss, weighed down by accounting charges tied to the industrial conglomerate's restructuring. But the company's core operations generated cash in the quarter and GE raised its cash-flow outlook for the year.
Larry Culp, who took over as CEO about a year ago, has been revamping GE with a focus on the company's power division, cutting its debt and generating cash from its businesses of making jet engines and power turbines.
"I'm starting to see the improvements I wanted to see when we started on this path a year ago," Mr. Culp said on a conference call Wednesday. GE's battered shares rallied on the latest results.
GE reported adjusted cash flow from industrial operations of $650 million for the third quarter and predicted it would generate as much as $2 billion of cash on that basis for the full year.
GE's struggles in recent years -- including a gutting of its dividend -- have made cash flow the most important financial measure for investors. GE previously projected 2019 cash flow ranging from negative $1 billion to positive $1 billion, an estimate it increased in July.
In the third quarter, GE reported a net loss attributable to common shareholders of $9.47 billion, compared with a year-ago loss of $22.8 billion, when it booked a big charge on its power business. Revenue was flat at $23.36 billion as gains in aviation and health-care units, were offset by declines in the power business.
GE booked an $8.7 billion charge to reflect the lowered value of its investment in oil equipment and services firm Baker Hughes. GE had previously warned investors about the charge as it sold down its stake in Baker Hughes. The company also recorded a $1 billion charge on its legacy insurance business and a $740 million write-down on the value of its hydropower business.
Excluding charges, GE said its adjusted earnings were 15 cents a share, ahead of an analyst projection of 12 cents a share, according to Refinitiv.
Shares of GE rose 8% to $9.82 in premarket trading. After tumbling in 2017 and 2018, the share price is still below where it was when Mr. Culp took over a year ago. He has called 2019 a reset year for the company and said it would take years to turn around the operations.
Mr. Culp said Wednesday GE was raising its cash-flow goals despite a drag from Boeing Co.'s grounding of its 737 Max airplane. The jet is powered by engines made by GE in partnership with France's Safran SA. GE had projected the grounding would cut cash flow by $400 million for each of the third and fourth quarters if the plane remains unable to fly.
The company said it completed a test on its long-term care insurance holdings in the third quarter to see whether it had enough cash reserved for its expected future obligations. Last year, the company had to commit $15 billion in additional reserves for the policies. This year, the company said the $1 billion deficiency charge was largely the result of lower market interest rates.
Analysts at Evercore ISI said the charge for the long-term care insurance reserves was on the low end of expectations. "Following its mega charge in early 2018 and the resulting black cloud cast over the life insurance industry...we think this news should come as a relief." Importantly, GE said its claims are developing as expected, while some other insurers have reported adverse developments.
The power division, which had been GE's biggest in terms of revenue, has been at the center of GE's financial and operational woes. The century-old business has suffered from deep losses amid a global drop in demand for power-generating equipment. GE said the unit's quarterly revenue fell 14% from a year ago to $3.93 billion, but the division narrowed its losses to $144 million.
Profits and revenue rose in GE's aviation and health-care units. The aviation division, which makes jet engines, had $8.11 billion in third-quarter revenue and generated $1.72 billion in profits. The health-care unit, which makes hospital equipment and had $4.92 billion in quarterly revenue, delivered a $974 million profit.
GE has been selling assets to pay down its debt, including cutting a deal to sell its biotechnology business for more than $20 billion to Danaher Corp., Mr. Culp's former company. Danaher said last week that it is making progress on closing the deal, including a $750 million asset sale that is contingent on the deal, but doesn't expect it to close until the first quarter.
--Leslie Scism contributed to this article.
Write to Thomas Gryta at email@example.com
(END) Dow Jones Newswires
October 30, 2019 09:26 ET (13:26 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.