GE Reports Surge in Year-End Cash Flow--Update
26 January 2021 - 11:56PM
Dow Jones News
By Thomas Gryta
General Electric Co. reported $4.4 billion in fourth-quarter
cash flow, beating its own projection and ending 2020 without
burning cash, a year ahead of schedule.
The Boston conglomerate said the surge of cash came from orders
in its power and renewables divisions, along with improved
financial efficiency. The company has been cutting corporate costs
and jobs in its aviation unit while streamlining its power
business.
The coronavirus pandemic continues to pressure GE's jet-engine
business, its largest division, but the overall results showed
progress in the yearslong turnaround of the company that also makes
health-care machines and power-generating equipment.
GE shares are up 60% in the last six months, closing Monday at
$10.99, as investors are encouraged by continued improvement in
cash flow, debt reduction and cost cutting. The S&P 500 index
is up about 20% in the same period. GE shares gained about 4% in
premarket trading Tuesday.
GE's cash flow is closely watched as a sign of the health of the
company's operations and ability to pay down debts. The company had
predicted fourth-quarter cash flow of at least $2.5 billion. The
company burned through $4.3 billion in cash in the first half of
the year.
For the full year, GE reported lower revenue after shedding
units, but positive cash flow of about $600 million from its
industrial operations. GE forecast $2.5 billion to $4.5 billion of
cash flow for 2021.
The GE aviation division's revenue fell nearly 35% to $5.8
billion in the fourth quarter, while orders fell by half. The drop
in aviation accounted for much of the decline in the company's
fourth-quarter revenue.
GE said Tuesday it expects the aviation market, which has been
sapped by the coronavirus pandemic, to begin recovering in the
second half. It expects 2021 revenue in the division flat or higher
from 2020.
A GE joint venture makes the engines for Boeing Co.'s MAX jet,
which was grounded in March 2019 after two deadly crashes but was
cleared to fly again in November. Boeing reports financial results
on Wednesday.
Cash flow was driven by the health-care division, which reported
$2.6 billion in cash flow for the year excluding its biopharma
operations, which it sold. The unit makes CT scanners, MRI machines
and other hospital equipment.
GE reported a jump in business in both its power unit, which
makes turbines for power plants, and its renewable-energy unit,
which mostly makes wind turbines. In the fourth quarter, orders at
power rose 26% and renewables jumped 34%. Slack demand in the power
unit had sapped GE's profits in prior years.
Overall, GE reported net income attributable to common
shareholders of $2.44 billion for the fourth quarter, compared with
a profit of $538 million a year before.
Excluding items, GE said its adjusted earnings were 8 cents a
share, compared with Wall Street's estimate of 9 cents a share.
Quarterly revenue fell 16% from a year before to $21.9 billion.
Write to Thomas Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
January 26, 2021 07:41 ET (12:41 GMT)
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