CEO Larry Culp told investors at a conference on Wednesday that free cash flow would be positive in the second half of 2020. That was a small comment. But it was new, and it was enough to give the stock a shot.
The event was Morgan Stanley’s annual Laguna Beach conference held on the West Coast. This year’s event is virtual due to the Covid-19 pandemic.
the industrial industry burned through approx. 3 billion $ in the first half of 2020. Improved cash flow in the second half would mean that year-round free cash flows would likely be better than Wall Street expects.
Analysts expect a full year 2020 cash burn of approx. 2 billion $, Which implies 1 billion. $ In positive free cash flow during the last half of the year. Investors seem to think that Culp’s comments mean that 1 billion. $ In positive free cash flow is a layup.
“On his [second-quarter] earnings calls, the company [said] sequential improvement in earnings and cash in the second half of 2020 can be achieved, ”Gordon Haskett analyst John Inch said in a research note on Wednesday. “Culp stated more definitively that the company would deliver positives [free cash flow] in the second half. Inch earns shares and has a price target of $ 5 for the share.
GE shares rose 10.8% to $ 6.76 on Wednesday.
When 2020 started, GE management expected to generate between $ 2 billion and $ 4 billion in industrial free cash flow, but that was before the pandemic.
And pandemic has punished GE shares. The stock has fallen by about 41% year to date, worse than comparable returns from
Dow Jones industrial average.
(AIR.France) fell 48% and 56% respectively. Aviation supplier warehouses Barrons the tracks are on average approx. 33% lower. US aviation stocks have fallen by approx. 40%.
Space travel has been hit harder than most sectors of the economy by pandemics. U.S. commercial air traffic fell more than 90% year-on-year in April, and the recovery has been slow. An analyst called the current environment aero-mageddon.
Coming into the pandemic, GE’s largest and most valuable business unit was commercial aviation. GE also has an aircraft leasing unit. Aircraft mean a lot to General Electric.
It also makes cash. Cash flows have been the focus of investors for some time. GE is still in turnaround mode, led by Culp, after previous management teams piled on debt through bad acquisitions.
The balance sheet is in better shape after large asset sales. But cash remains king.
Write to Al Root at email@example.com