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General Electric Misses Q4 Earnings Forecast, But Sees Solid 2021 Industrial Cash Flows; Shares Surge

GE said industrial cash flows for the 2021 year should rise to between $2.5 billion and $4.5 billion, delivering on a key commitment from CEO Larry Culp.

General Electric Co.  (GE) - Get General Electric Company Report posted weaker-than-expected fourth quarter earnings Tuesday, but forecast solid industrial free cash flow growth for the coming year, sending its shares sharply higher in early trading.

General Electric said adjusted non-GAAP earnings for the three months ending in December were pegged at 8 cents per share, down 62% from the same period last year and one penny shy of the Street consensus forecast. Group revenues, General Electric said, fell 16.5% to $21.9 billion, coming in just ahead of analysts' estimates of a $21.822 billion tally.

Looking into the 2021 financial year, GE said it sees adjusted earnings in the region of 15 cents to 25 cents per hare, as well as industrial free cash  flows of between $2.5 billion and $4.5 billion. Industrial free cash flow for the fourth quarter was $4.4 billion and well ahead of GE's own guidance of $2.5 billion.

“As 2020 progressed, we significantly improved GE's profitability and cash performance despite a still-difficult macro environment. The fourth quarter marked a strong free cash flow finish to a challenging year, reflecting the results of better operations as well as strong and improving orders in Power and Renewable Energy." said CEO Larry Culp. 

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“Over the past year our team proved resilient, and momentum is growing across our businesses. We are in leading positions to capture opportunities in the energy transition, precision health, and the future of flight," he added. "As we continue our transformation, we remain focused on strengthening GE and delivering value for the long term."

General Electric shares were marked 6.2% higher in early trading following the earnings release to change hands at $11.67 each, a move that would extend the stock's six-month gain to around 74%.

GE said last month that it has pre-funded $2.5 billion in minimum pension payments for the next three years and repaid a $1.5 billion loan to GE Capital.

GE Power revenues were essentially flat to last year at $5.38 billion, the company said, while Aviation revenues plunged 35% to $5.85 billion as the continued grounding of Boeing Co. BA 737 MAX, as well as significant slump in demand for passenger aircraft, hammered the division's top line.

Aviation division orders were down 41%, GE said, while overall profits fell by $1.5 billion to $564 million.