Picture: REUTERS/BENOIT TESSIER
Picture: REUTERS/BENOIT TESSIER

Washington, US — General Electric (GE) surged after the company reported a surprise profit and predicted gains in free cash flow late in 2020 and in 2021.

Adjusted earnings of 6 US cents a share in the third quarter bucked Wall Street’s expectations for a 4c loss, and sales of $19.4bn also exceeded analyst estimates. Industrial free cash flow, a key gauge of earnings power, will be at least $2.5bn in the fourth quarter and positive in 2021, GE said in a statement on Wednesday as it reported quarterly results.

The financial improvement buoys CEO Larry Culp’s efforts to get his turnaround back on track after the coronavirus pandemic upended GE’s jet-engine division and harmed its other businesses. While orders still sank in the third quarter in GE’s aviation, power equipment and healthcare units, the upbeat outlook underscores the company’s progress in stabilising its operations amid the crisis.

“GE’s transformation is accelerating,” Culp said in the statement. “We are managing through a still-difficult environment with better operational execution across our businesses, and we are on track with our cost and cash actions.”

The shares climbed 7.4% to $7.63 at 9.39am in New York, confounding a slump in the broader market. GE tumbled 36% in 2020 to the close on Tuesday, compared with a 4.9% decline in a Standard & Poor’s index of US industrial companies.

Industrial free cash flow was $514m in the third quarter. Analysts had expected GE to burn through $968.3m in cash.

Bloomberg

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