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General Electric Stock Leaps After Q3 Earnings Beat, Profit Outlook Boost

General Electric narrowed its industrial free-cash flow forecast following a mixed set of third quarter results that included stronger profits but modestly weaker revenues.

General Electric Co  (GE) - Get General Electric Company (GE) Report posted stronger-than-expected third quarter earnings Tuesday, and lifted its full-year profit outlook, but narrowed its industrial cash flow forecast amid what it called a "challenging operating environment" and "global supply chain disruptions". 

GE said the biggest supply chain hit came in its healthcare division, adding it expects disruptions to last through at least the first half on next year, alongside a 'more challenging" inflationary environment. 

For the three months ending in September, however, General Electric said adjusted non-GAAP earnings were pegged at 57 cents per share, up 18.75% from the same period last year and 14 cents ahead of the Street consensus forecast. Group revenues, General Electric said, slipped 1% to $18.4 billion, coming in well shy of analysts' estimates of a $19.251 billion tally.

Looking into the final months of the year, GE said it sees earnings in the region of $1.80 to $2.10 per share -- compared to its prior forecast of $1.20 to $2.00 --  and narrowed its forecast for industrial free cash flows to between $3.75 billion and $4.75 billion compared to its earlier estimate of $3.5 billion and $5 billion. 

“The GE team delivered another strong quarter. Orders grew, margins expanded, our overall cash performance was significantly better, and Aviation is building momentum and showing continued signs of recovery," said CEO Larry Culp. "The teams are managing through a challenging operating environment, including global supply chain disruptions and onshore wind market pressure due to the U.S. Production Tax Credit. Against that backdrop, we're raising our 2021 EPS expectations and narrowing our full-year free cash flow outlook."  

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"Our progress strengthening our balance sheet and operations enables us to drive long-term growth and value in our businesses," he added. "With leading positions in our markets, we are serving customers with vital equipment and services that shape the future of flight, advance precision health, and lead the energy transition. We remain on track to deliver high single-digit free cash flow margins over time."  

General Electric shares were marked 2.2% higher in early afternoon trading following the earnings release to change hands at $107.62 each.

GE shares have gained around 4% since debuting their split-adjusted price on August 2 as investors looked past the group's stronger-than-expected second quarter earnings last week and an improved outlook for industrial cash flows to fragility in the global economic recovery and surging input costs for the industrial sector. 

JPMorgan analysts Stephen Tusa, a long-time GE skeptic who carries a 'neutral' rating with a $55 price target on the stock, said earlier this month that weakening near-term fundamentals make the industrial group's longer-term anchors "more optimistic" . 

He also suggested that recent portfolio moves, as well as the appointment of a new CEO at GE Healthcare earlier this summer, represent a "plan b' for the company as it moves into a more difficult macroeconomic backdrop over the final months of the year.