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General Electric
reported second-quarter earnings of 17 cents a share of revenue of $ 28.8 billion. Revenue was 5 cents better than Wall Street expected. In addition, the company collected the results for the full year 2019 and the cash flow guidance.
As is often the case, but with General Electric (ticker GE) the results are complicated – there are many moving parts. The 17th century excludes some one-off costs and tax benefits.
The results still look better than expected, and what management said about cash flow in the quarterly release will mean much more to the stock than reported earnings. Management now expects the company to not burn through cash (taking center stage in the 2019 guidance). That's better than the $ 0-2 billion incineration projected when GE reported its first-quarter figures. (19659006) CEO Larry Culp says in the company's news release.
The back story. Cash is more important than earnings for investors currently because GE still qualifies as a turnaround situation. New CEO Culp sells assets to reduce debt, as well as reduce costs to return the troubled power division to profitability.
What's new. Orders and sales in the power division were 22% and 25% lower than one year ago, respectively. Things are still tough. GE cuts expenses to position the business in the near future; reported costs fell 10% from the previous year.
Boeing
(BA) was mentioned in the company's news release, but only briefly. During the conference call, there was several news: Management referred to comments from the Paris air show on the GE9X engines, built for the latest 777 aircraft. The GE9X program incurs extra costs in connection with a sharing problem mentioned by Boeing during the conference call.
Continued ground support for Boeing's 737 MAX jet will reduce GE's cash flow by $ 400 million in both the third and fourth quarters. It is a sign that ongoing MAX delays may hit aviation providers; GE makes the Leap engines that operate the MAX jet. "Remember that the leap volume is scheduled to increase in the second half, and that's really what [the cash flow guidance] is about," Culp said. And when it comes to the overall outlook for [cash flow]we certainly monitor it. It is built into the frame. ”
GE Capital revenues dipped just slightly from the first quarter of 2019.
Looking ahead: The results look like a gain for GE investors. Barron expected the stock to have a good day, relative to the overall market, but Wall Street is still digesting the numbers.
Bulls and bears seem entrenched in their positions. JPMorgan analyst Stephen Tusa called the revenue "low quality" and RBC analyst Deane Dray wrote "GE provided a number of headline positives in [the second quarter] that we expect to be well received by investors. "Dray is investing in GE share Buy, while Tusa is ranking it on Sell.
The downturn seems to be winning. $ 196 in mid-morning.
As of Tuesday's close, the GE stock was up nearly 45% the year before, far better than the 18% return in
Dow Jones industrial average.
Still, the stock is down nearly 17% over the past year, down from a 7% gain for Dow over the same range.
GE also announced this morning, in a separate news release, that CFO Jamie Miller will "step down from his role." Miller has been with GE for 11 years.
Write to Al Root at allen.root@dowjones.com
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