(Bloomberg) – General Electric Co. predicted slow gains in operations this year and next after the coronavirus pandemic hit results in the second quarter. The jet engine division has traced “early signs of improvement” at flight departures on the road to a prolonged recovery, GE said in a presentation as it reported results. The company consumed $ 2.1 billion in free industrial cash in the second quarter, less than the $ 3.3 billion drain expected by analysts.
“It really is a sequential improvement from here,” CEO Larry Culp said in a call with analysts. “The environment is still challenging. But with regard to things under our control, we believe healthcare is well positioned to lead, shifts in power and renewables continue, and we look forward to a multi-year recovery in aviation. “
Culp is trying to get GE back on track after the pandemic turned around that started after taking over in 2018. GE posted a double-digit decline in orders on all its industrial businesses in the second quarter on Wednesday, with comparable sales falls in all units except renewable energy. Revenue in the aviation business fell 44% when the virus destroyed air travel and lowered long-term prospects for aircraft sales.
“Covid-19 clearly gave us back,” Culp said in an interview. “It will take us a little longer, just because of what happened in aviation, in particular. But with that said, today I am more confident than ever that we will see this transformation. ”
The company has expedited some aspects of its review, he said. GE has reduced debt by approximately $ 9.1 billion this year, bolstered cash to $ 41 billion, and took steps to eliminate $ 2 billion in costs and preserve $ 3 billion in cash.
What Bloomberg Intelligence Says:
“Negative order trends in General Electric’s portfolio and high declining margins are a clear reminder that it will take years for the company to achieve credit protection measures more consistent with its Baa1 / BBB + / BBB rating.”
Joel Levington, Director of Credit Research
Click here to read the research.
GE posted an unrealized pre-tax gain of $ 1.8 billion during the quarter on its plan to sell its stake in Baker Hughes for the next three years. The company will use the proceeds to pay off the debt.
The company’s shares fell 4.1% to $ 6.61 at 10:49 am in New York. GE fell 38% this year through Tuesday, while the Standard & Poor’s index of industrial companies fell 12%.
Second-quarter results generally coincided with low investor expectations, wrote John Inch, analyst at Gordon Haskett, in a note to clients.
“It seems clear that GE’s fundamentals, including cash flow challenges, are likely to persist for many quarters / years without an obvious recourse as the company has largely sold what it can,” Inch said.
(Updates with Culp’s comment in the fifth paragraph)
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