General Electric Q3 2019 earnings beat, GE raises 2019 forecast

Earnings


General Electric‘s stock surged Wednesday after the industrial conglomerate raised its 2019 cash flow forecast and reported adjusted third-quarter earnings and revenue that topped analysts’ expectations. On a nonadjusted basis, and including certain accounting charges, GE still lost $9.5 billion in the quarter.

GE shares jumped 11.5% on heavy trading volume to close at $10.11 a share, its second best day of trading this year.

Here’s what the company reported versus what Wall Street expected:

  • EPS: adjusted 15 cents a share, vs. 11 cents a share expected by analysts surveyed by Refinitiv.
  • Revenue: $23.36 billion, vs. $22.93 billion expected in the Refinitiv survey.

“Our results reflect another quarter of progress in the transformation of GE,” Chairman and CEO Larry Culp said in a statement.

GE said its closely watched industrial free cash flow, which is used as a gauge of efficiency, totaled $650 million. FCF is money left over after a company pays for operating expenses and capital spending. The company increased its 2019 forecast for industrial FCF to a range of flat to $2 billion, up from a range between negative and plus $1 billion.

“We are raising our industrial free cash flow outlook again even with external headwinds from the 737 Max and tariffs,” Culp said.

On the whole, GE reported a consolidated net loss of $9.5 billion for the third quarter. While improved from a $22.8 billion nonadjusted loss for the same period last year, the bottom line reveals GE is still a struggling industrial conglomerate in the depths of a turnaround.

The company’s troubled power division saw quarterly revenue fall 14% year over year to $3.9 billion from $4.6 billion as orders for its turbines and other products fell 30%. But the division recorded a $144 million loss, improved 79% from the $676 million loss it reported a year earlier.

“I’m relieved; you didn’t really know walking into the quarter [what to expect from GE], particularly with what’s going on at Boeing,” Melius Research analyst Scott Davis said on CNBC’s “Squawk Box.” Davis has a buy rating on GE’s stock.

GE’s key aviation business logged an 8% increase in revenue from the same quarter last year, to $8.1 billion from $7.5 billion. The company continues to warn that its aviation unit may see a cash flow hit from the grounding of the Boeing 737 Max. GE makes the LEAP engines used on Boeing’s top-selling airplane. But GE sold 455 LEAP engines during the quarter, 50% more than a year earlier even as the company said it continues “working through MAX” issues.

“We still expect this year to be impacted to the tune of about negative $1.4 billion,” CFO Jamie Miller said of delays in aircraft engine production during the company’s third-quarter earnings call.



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