Improving profitability and solid free cash flow performance are some of the factors that are helping strengthen General Electric (NYSE:GE) sentiments among investors. The company is coming off an impressive fourth-quarter helped by improving and solid orders in power and renewable energy segments.
GE Bounce back
General Electric was one of the hardest-hit companies as COVID-19 disrupted its operations on bringing to a halt a good number of industries from where it generates industrial orders. With the travel industry coming to a halt, most airlines were forced to halt operations conversely, affecting aeroplane parts and engines supply.
The industrial juggernaut rolled back to life in the fourth quarter as a better understanding of the pandemic brought reprieve resulting in the opening of global economies. The company generating $4.4 billion in industrial free cash flow amid a challenging macro environment all but affirms the impact of the turnaround spearheaded by CEO Larry Culp’s.
Earnings Beat
General Electric earnings were down by 62% to 8 cents a share in line with Wall Street expectations. Revenues, on the other hand, fell 19% to $21.9 billion slightly above consensus estimates of $21.27 billion. Total orders only fell 3% to $23.2 billion.
However, it is the 12% increase in industrial free cash flow to $4.4 billion that got the market excited as it came above initial guidance of $2.5 billion and above $2.8 billion expected by Wall Street. Likewise, General Electric excited the market by issuing a cash-flow outlook that beat Wall Street expectation.
The industrial juggernaut expects free cash flow of between $2.5 billion and $4.5 billion in 2021. In contrast, the markets expect $2.57 billion. The solid guidance put to rest any liquidity concerns. Focus now shifts to how the company will fare as activities in the aviation industry improve in the wake of vaccine rollouts.
A spike in aviation activity, especially in the air travel industry is expected to fuel demand for the company’s aeroplanes spare parts key to strengthening the revenue base.