GE lifts full-year free cash flow target on recovery hopes

[July 27, 2021]  (Reuters) -General Electric Co on Tuesday lifted its free cash flow forecast for the year after unexpectedly reporting positive cash flow in the second quarter as industrial orders and revenue returned to growth.

The Boston-based company said it expects 2021 free cash flow to be $3.5 billion to $5 billion, up from its prior forecast of $2.5 billion to $4.5 billion.

It reported a free cash flow of $388 million in the quarter. That compared with Refinitiv's average analyst estimate of an outflow of $287 million, and following an outflow of $2.1 billion last year.

Free-cash flow is closely watched by investors as a sign of the health of GE's operations and ability to repay debt.

Shares surged 3.7% to $13.4 in premarket trading.

All of GE's industrial segments saw an improvement in profit margin in the latest quarter, with the aviation unit posting the biggest improvement.

The aviation business, usually the company's cash cow, has been hammered by the COVID-19 pandemic as airlines cut back on flights and grounded aircraft.

GE said the business is showing "early signs" of recovery.

A recovery in the aviation business is critical for Chief Executive Larry Culp to deliver $7 billion in free cash flow by 2023, which will provide greater resources to the company to invest in its businesses, pay a more competitive dividend and buy back shares.

Revenue rose to $18.28 billion from $16.81 billion in the quarter ended June 30.

GE reported adjusted profit of 5 cents per share for the quarter, compared with Refinitiv's average analyst estimate of a profit of 3 cents per share.

(Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; Editing by Saumyadeb Chakrabarty and Bernadette Baum)

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