General Electric shares pop on better-than-expected industrial cash flow, rosy outlook

The conglomerate has continued to pay down its debt during the pandemic and cut costs through, for example, layoffs in its aviation business. Read more...

A logo is displayed next to a gas turbine at the General Electric Co. (GE) energy plant in Greenville, South Carolina, U.S., on Tuesday, Jan. 10, 2017. General Electric Co. is scheduled to release earnings figures on January 20.

Sharrett / Bloomberg / Getty Images

Shares of General Electric jumped by more than 6% in premarket trading Tuesday after the company reported better-than-expected industrial free cash flow for the fourth quarter and a rosy outlook for this year.

The company closed the fourth quarter with $4.37 billion in industrial free cash flow, a surprise after CEO Larry Culp projected at least $2.5 billion for the last three months of the year. The strong quarter pushed the company’s industrial free cash flow into positive territory for the year.

GE also projected it would generate between $2.5 billion and $4.5 billion in industrial free cash flow for 2021.

The company also reported a revenue for the fourth quarter that slightly beat analyst expectations while its profits fell short of estimates as the industrial giant continues to weather the coronavirus pandemic.

Here’s how GE performed compared with what Wall Street expected, based on average analysts’ estimates compiled by Refinitiv:

Adjusted EPS: 8 cents versus 9 cents expected.
Revenue: $21.93 billion vs $21.83 billion

The stock has been on a tear in recent months, sparked by a surprise third-quarter profit reported in October that sent the stock surging by more than 70% over the fourth quarter. Positive Covid-19 vaccine news, which bodes well for the conglomerate’s beleaguered aviation sector, has sustained the rise.

And some investors are bullish on the company’s turnaround under Culp, especially as he forecasts positive cash flow for 2021. The firm has continued to pay down its debt during the pandemic and cut costs through, for example, layoffs in its aviation business.

“As 2020 progressed, we significantly improved GE’s profitability and cash performance despite a still-difficult macro environment,” Culp said in a statement. “The fourth quarter marked a strong free cash flow finish to a challenging year, reflecting the results of better operations as well as strong and improving orders in Power and Renewable Energy.”

This story is developing. Check back here for updates.