Cash flow to rebound next year

General Electric (GE) has issued a weak 2019 earnings outlook and forecast a negative industrial FCF (free cash flow) this year due to its ailing power business. Despite this dismal outlook, though, its stock rose nearly 3% on March 14 after CEO Larry Culp promised a rebound in cash flow in 2020.

Culp stated that the company has complex challenges this year and that his management team is taking strategic actions to strengthen its balance sheet and businesses.

Why GE Rose 3% Yesterday despite Its Weak 2019 EPS Outlook

In a press release, Culp said, “We expect 2020 and 2021 performance to be significantly better with positive Industrial free cash flow as headwinds diminish and our operational improvements yield financial results. We will continue to take thoughtful actions to reduce downside risk and increase upside optionality to create long-term value for our shareholders.” GE expects its adjusted industrial FCF to be positive in 2020 and the pace of its improvement to further accelerate in 2021.

Later, on CNBC’s Jim Cramer’s Mad Money, Culp asked shareholders, employees, and retirees to give his management some time. He said, “We have opportunities, we certainly have some problems. It’ll take us a while but if people give us the benefit of the doubt I think they’re going to see improvement over time.”

It seems investors embraced Culp’s view, as the stock made a strong rebound. Notably, GE stock plunged over 4.5% initially in the premarket trading session, but Culp’s statement eased investors’ fears, and GE gained 2.8% in regular trading hours. So far this year, GE stock has risen 41.5%, outperforming its industrial (XLI) peers. Major competitors United Technologies (UTX), 3M Company (MMM), and Honeywell International (HON) have risen 19.2%, 8.8%, and 17.5%, respectively, this year.

Fiscal 2019 outlook

For fiscal 2019, GE expects its non-GAAP (generally accepted accounting principles) EPS to fall 8%–23% to $0.50–$0.60. The company’s earnings guidance range is much lower than Wall Street analysts’ consensus estimate of $0.70.

The industrial conglomerate expects its non-GAAP industrial organic revenue to grow in the low- to mid-single-digit percentage range. Additionally, GE expects its non-GAAP industrial margin to expand in the range of 0–100 basis points. The company’s non-GAAP industrial margin was 9% last year. The company expects its 2019 industrial FCF to be in the range of breakeven to -$2 billion.

Latest articles

This year, Pfizer (PFE) stock has fallen 0.34% and Bristol-Myers Squibb (BMY) stock has fallen 6.48%. Both companies are focused on strengthening their position in the high-growth oncology and immunology markets. Let's take a closer look at each.

Walt Disney’s (DIS) latest movie, Toy Story 4, has reportedly broken records in the opening weekend with $118 million in sales. However, the opening weekend collection was behind analysts’ expectations of at least $150 million in the first weekend.

24 Jun

Will Home Depot’s Upward Momentum to Continue?

WRITTEN BY Rajiv Nanjapla

As of June 21, Home Depot (HD) was trading at $209.39, which implies a rise of 9.7% since the announcement of its first-quarter earnings on May 21. Also, the company was trading at a premium of 32.4% from its 52-week low of $158.09 and a discount of 2.8% from its 52-week high of $215.43.

On June 21, Aurora Cannabis (ACB) made an announcement that indicated that it will move towards higher margin vape products. In addition, the company also believes concentrates and edibles will command higher margins. In anticipation of this development, the company announced the expansion of its facility to capitalize on growth related to these segments.

Shares of Mondelēz International (MDLZ) are scaling new heights thanks to its stellar gains so far this year. Mondelēz stock is up 38.0% on a YTD (year-to-date) basis, and it closed at $55.25—just a shade lower than its 52-week high of $55.71—on June 21.

24 Jun

How Long Will Facebook's Libra Fuel Bitcoin Rally?

WRITTEN BY Mayur Sontakke, CFA, FRM

Ever since the news about Facebook’s (FB) cryptocurrency project broke, Bitcoin has rallied on the hope that Facebook’s entry in the space will help make cryptocurrencies mainstream. Facebook’s cryptocurrency will be called Libra and will be governed by an association with 28 founding members across industries.

172.31.16.229