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General Electric Shares Hit One-Year Higher After Topping Q4 Earnings Forecast

Larry Culp's ongoing turnaround at General Electric continues to pay off, with stronger-than-expected fourth quarter profits and predicted improvement in cash flows.

General Electric Co.  (GE)  shares hit a 52-week high Wednesday after it posted stronger-than-expected fourth quarter earnings, and said its 2020 industrial profits and cash flow will improve notably this year, as the ongoing turnaround under CEO Larry Culp continues to win over investors.

GE said adjusted non-GAAP earnings for the three months ending in December came in at 21 cents per share, up 23.5% from the same period last year and 3 cents ahead of the Street consensus forecast. Group revenues, GE said, were pegged at $26.2 billion, a 1% decline from last year but still topping analysts' estimates of a $25.6 billion tally.

Looking into the 2020 fiscal year, GE said 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)  grounded 737 MAX aircraft, and fell modestly shy of the Refinitiv forecast of 66 cents per share. 

"The fourth quarter marked a strong close to the year for GE. We met or exceeded our full-year financial targets and are on a positive trajectory for 2020. We're proud of our progress in 2019, including decisive actions to reduce our leverage and strengthen our businesses," said CEO Larry Culp. 

"Our work continues, but GE's committed team, exceptional technology, and global network make me more confident than ever that we can deliver," he added. "Our priorities looking forward are clear. We are solidifying our financial position, continuing to strengthen our businesses as improvement efforts build momentum, and driving long-term profitable growth. We remain committed to creating value as we continue our multi-year transformation.”

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GE shares were marked 9.7% higher in early trading following the earnings release to change hands at $12.88 each, a 52-week high that extends its six-month gain to around 24%. 

GE also said it is working closely with Boeing Co. BA to ensure the safe return to service of the grounded 737 MAX, which the planemaker has provisionally guided to the middle of this year. GE, along with France's Safran, participates in a consortium that builds engines for the troubled commercial aircraft. 

GE said revenues from its power division were essentially flat to last year, at $5.4 billion, while renewable energy revenues rose 2% to $4.7 billion.

Industrial division revenues are expected to rise by a low single-digit percentage this year, excluding any potential mergers or takeovers, while profit margins improve by as much as 75 basis points. 

"We view the 2020 Industrial free cash flow guide of $2 billion to "$4 billion as a positive," said Credit Suisse analyst John Walsh. "This compares to our $3.3 bilion estimate, which we think was closer to the higher end of investor expectations into the print." 

"The free cash flow guide assumes BioPharma closes in Q1, mid-year 737MAX return to service, continued progress at Power and a turnaround at Grid and Hydro," he added.