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MarketScreener Homepage  >  Equities  >  Nyse  >  General Electric Company    GE

GENERAL ELECTRIC COMPANY

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General Electric : CEO sets low 2019 profit targets, vows better from 2020

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03/14/2019 | 02:42pm EDT
FILE PHOTO: The logo of US conglomerate General Electric is pictured at the company's site of its energy branch in Belfort

(Reuters) - General Electric Co Chief Executive Larry Culp on Thursday set conservative profit targets for this year and staked his reputation on hitting them and doing better in 2020 and beyond, igniting a rally in the stock.

Culp's detailed pep talk, which drew praise from Wall Street analysts on a conference call, swiftly reversed an earlier rout in the stock as he stressed GE was serious about its targets after years of missing profit expectations.

The forecast was low largely because GE will be spending $2.5 billion (1.9 billion pounds) on restructuring this year, Culp said, adding the investment would pay off after a tough 2019.

"This is what constitutes a 'reset,'" Culp said, using a word many analysts had longed to hear.

"The market should interpret a high level of conviction (in the forecast) simply because this team, in a public forum, is laying this roadmap out, mindful of the realities of 2019 but I think also optimistic ... about the impact of what we're doing."

Culp did not soft-pedal the short-term pain. He said 2019 adjusted profit would be 50 cents to 60 cents a share, below analyst estimates of 70 cents, and GE could lose as much as $2 billion in cash from its industrial businesses, putting a number on a warning he issued last week.

The company expects free cash flow at GE Power to remain negative in 2020 before turning positive in 2021.

Investors are looking closely at GE's cash and earnings after the company lost nearly $23 billion last year.

The outlook is "arguably better than expected," said Deane Dray, an analyst at RBC Capital Markets.

The company did not make reference to any potential hit to its jet engine unit from the recent global grounding of Boeing Co's 737 MAX aircraft. GE and partner Safran SA make the engine that powers all 737 MAX planes.

GE shares were up 2.9 percent at $10.31 in afternoon trading, after falling 4 percent in premarket activity shortly after the forecast was released. GE bonds also rose slightly.

"While lowered guidance is not a positive, we think GE's plan and progress show it's moving in the right direction," said Jim Corridore, analyst at CFRA.

Culp also left considerable wiggle room in the forecast by including an unspecified amount of "contingency" money to cover hard-to-predict costs, such as when it will conclude big asset sales and how its power unit will perform.

JPMorgan analyst Stephen Tusa voiced concern that the gap between GE's cash flow and earnings forecasts was the widest he had seen, which likely will mean analysts' profit estimates are too high.

Culp said that although GE was taking "a safe conservative posture in this reset year ... Rest assured, operationally, we're running hard."

(Additional reporting by Rachit Vats in Bengaluru and Kate Duguid in New York; Editing by James Emmanuel and Bernadette Baum)

By Alwyn Scott and Sanjana Shivdas

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Financials ($)
Sales 2019 117 B
EBIT 2019 10 361 M
Net income 2019 4 679 M
Debt 2019 41 339 M
Yield 2019 0,42%
P/E ratio 2019 25,25
P/E ratio 2020 20,62
EV / Sales 2019 1,06x
EV / Sales 2020 1,07x
Capitalization 82 412 M
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Mean consensus OUTPERFORM
Number of Analysts 20
Average target price 12,8 $
Spread / Average Target 35%
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Managers
NameTitle
H. Lawrence Culp Chairman & Chief Executive Officer
Jamie S. Miller Chief Financial Officer & Senior Vice President
Victor Abate Chief Technology Officer & Senior Vice President
James J. Mulva Independent Non-Executive Director
William Geoffrey Beattie Independent Director
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