General Electric Sees Coronavirus Hit to Industrial Cash Flows in Q1; Holds 2020 Forecasts

GE said it's 'closely monitoring' the COIVD-19 outbreak as an 'evolving variable' to its 2020 earnings forecasts.
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General Electric Co.  (GE) - Get Report shares edged higher Wednesday after the industrial giant said the economic impact from the coronavirus would hit cash generation in its crucial industrial division.

In a detailed profit outlook, GE reaffirmed its 2020 profit, revenue and free-cash flow targets for its industrial division, but noted that the latter would suffer a coronavirus hit of between $300 million and $500 million over the first three months of the year.

The group said it expects to adjusted first quarter earnings of around 10 cents per share, compared to a pre-coronavirus Street forecast of 13 cents per share, with industrial free cash flows pegged at negative $2 billion. 

'We entered this year with momentum having diligently addressed our most pressing issues and reset our foundation in 2019. While there's more work ahead, I am confident in our ability to execute given the strengths of GE's team, technology, and global reach and capabilities," said CEO Larry Culp. 

"We remain focused on our priorities of solidifying our financial position, continuing to strengthen our businesses, and driving long-term profitable growth as our multi-year transformation accelerates." 

GE shares were marked 1.1% higher in early Wednesday trading following the release to change hands at $11.00 each. The stock had previously been marked 3.24% higher prior to the 2020 update release.  

GE had said earlier this year that it sees adjusted earnings in the range of 50 cents to 60 cents per share and industrial free cash flows of between $2 billion and $4 billion. 

GE's profit outlook, however, is at least partly contingent on a mid-2020 return to service for Boeing's  (BA) - Get Report grounded 737 MAX aircraft, and fell modestly shy of the Refinitiv forecast of 66 cents per share. 

 "Compared to 2019, GE's 2020 outlook assumes lower free cash flow and profit from BioPharma due to its planned disposition in the first quarter, subject to regulatory approval, as well as reduced cash from Baker Hughes shareholder dividends," the company said, but noted that would be offset by "performance improvements and reduced non-operational headwinds. GE’s 2020 outlook also assumes the 737 MAX returns to service in mid-2020, in line with Boeing."