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GE CEO Says Industrial Free Cash Flow Will Turn Negative In 2019

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GE CEO Says Industrial Free Cash Flow Will Turn Negative In 2019

General Electric Co. (NYSE: GE)'s stock tanked Tuesday afternoon after CEO Larry Culp delivered yet another round of bad news at the J.P. Morgan Aviation, Transportation & Industrials Conference.

Disappointing Guidance

In his presentation, Culp said GE is expecting fiscal 2019 organic sales growth in the low to mid single-digit range. He also said the company is expecting significant headwinds to cash flow this year, including negative overall cash flow from the company’s industrial business.

To make matters worse, Culp said the company’s struggling power business will experience “a couple of years” of additional difficulties. The company said the cash burn from GE’s power business will be larger in 2019 than previously anticipated.

Investors were aggressively selling the stock on Tuesday following the news, which seems to be an indication things are going from bad to worse for GE. Despite all its problems in the past year, GE was still able to generate $4.5 billion in industrial free cash flow last year.

Asset Sales

GE has been aggressively selling off assets under Culp’s leadership since he joined the company as CEO back in October of 2018. In late February, GE announced the sale of its biopharma business to Danaher Corporation (NYSE: DHR) for $21.4 billion.

In his presentation Thursday, Culp said GE’s strategy is simple and clear: Goals include “reduce leverage and improve our financial situation” and “strengthen our business, starting with Power.”

Uncertain Future

Wall Street analysts are on the fence about GE’s plan, but even the ones who see the company on the right long-term path say it will be a slow transformation process.

“We recognize that the Power turnaround will not happen overnight with plenty of headwinds to structural profitability in the business, making it difficult to set a reasonable range of normalized EPS or FCF by ’20 post Healthcare exit,” Bank of America analyst Andrew Obin wrote in February.

Shares traded around $9.96 at time of publication. GE's stock is now down 67.8 percent overall in the past three years.

Related Links:

Analysts Remain Skeptical Amid General Electric's Aggressive Asset Sales

Analyst: Normalized GE Earnings Difficult To Forecast

Photo credit: Momoneymoproblemz (Own work), via Wikimedia Commons

Latest Ratings for GE

DateFirmActionFromTo
Mar 2021Deutsche BankMaintainsHold
Mar 2021OppenheimerDowngradesOutperformPerform
Mar 2021Morgan StanleyMaintainsOverweight

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