GE Reports Surge in Year-End Cash Flow--2nd Update
By Thomas Gryta
General Electric Co. powered through a global pandemic that
hobbled its aviation business, reporting a surge in cash flow from
other divisions that helped it end 2020 on much firmer footing than
it had warned of in the spring.
GE booked $4.4 billion in fourth-quarter cash flow, beating its
own projection and ending 2020 without burning cash, a year ahead
The Boston conglomerate has improved its cash generation by
cutting overhead costs and jobs in its aviation unit while
streamlining its power business. The fourth quarter was boosted by
a flurry of power and renewable energy orders that closed in
December, executives said.
"We had a strong finish with respect to orders that helped us
from a cash perspective, both in power and particularly in
renewables, but it was very hard to call as to whether those orders
would indeed happen inside the calendar year," Chief Executive
Larry Culp said.
"We had as good a year as we could have ever hoped for in 2020
relative to the multiyear journey that we're on," said Mr. Culp,
who took over in October 2018 when GE was reeling from problems in
its power unit and a legacy insurance business.
The coronavirus pandemic continues to pressure GE's jet-engine
business, its largest division, but the overall results showed
progress in the yearslong turnaround of the company that also makes
health-care machines and power-generating equipment.
GE shares are up 60% in the last six months as investors are
encouraged by continued improvement in cash flow, debt reduction
and cost cutting. The S&P 500 index is up about 20% in the same
period. GE shares gained about 5% in Tuesday morning trading but
were still hovering below where they were when Mr. Culp took
GE's cash flow is closely watched as a sign of the health of the
company's operations and ability to pay down debts. The company had
predicted fourth-quarter cash flow of at least $2.5 billion. The
company burned through $4.3 billion in cash in the first half of
the year before reporting about $500 million in positive cash flow
for the third quarter.
For the full year, GE reported lower revenue after shedding
units, but positive cash flow of about $600 million from its
GE forecast $2.5 billion to $4.5 billion of cash flow for 2021,
and Mr. Culp said the final result within that range will depend
almost entirely on the aviation division's prospects. The air
travel industry will eventually get back to 2019 levels, Mr. Culp
said, but there is still too much uncertainty to predict the timing
of that recovery.
GE expects the aviation market to begin recovering in the second
half with 2021 revenue in the division flat or higher from
The GE aviation division's revenue fell nearly 35% to $5.8
billion in the fourth quarter, while orders fell by half. The drop
in aviation accounted for much of the decline in the company's
A GE joint venture makes the engines for Boeing Co.'s MAX jet,
which was grounded in March 2019 after two deadly crashes but was
cleared to fly again in November. Boeing reports financial results
Cash flow was driven by the health-care division, which reported
$2.6 billion in cash flow for the year excluding its biopharma
operations, which it sold. The unit makes CT scanners, MRI machines
and other hospital equipment.
GE reported a jump in business in both its power unit, which
makes turbines for power plants, and its renewable-energy unit,
which mostly makes wind turbines. In the fourth quarter, orders at
power rose 26% and renewables were up 34%. Slack demand in the
power unit had sapped GE's profit in prior years.
Mr. Culp became the first CEO from outside of GE after deep
problems in its power unit and financial services arm forced it to
slash its dividend and sell off businesses. He has sought to put
the problems behind the company, and last month GE settled a
yearslong accounting probe by the Securities and Exchange
Commission for $200 million without admitting or denying the SEC's
Overall, GE reported net income attributable to common
shareholders of $2.44 billion for the fourth quarter, compared with
a profit of $538 million a year before.
Excluding items, GE said its adjusted earnings were 8 cents a
share, compared with Wall Street's estimate of 9 cents a share.
Quarterly revenue fell 16% from a year before to $21.9 billion.
GE cut its debt by $16 billion in 2020 and ended the year with
$37 billion in cash. The company continues selling assets, raising
$735 million Friday from selling shares in Baker Hughes Co. GE owns
about a 30% stake in Baker Hughes after combining its oil division
with the company.
Write to Thomas Gryta at firstname.lastname@example.org
(END) Dow Jones Newswires
January 26, 2021 12:40 ET (17:40 GMT)
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