GE shares fall on cash,
business worries though profit beats
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[April 22, 2017]
By Alwyn Scott
NEW YORK (Reuters) - General Electric Co
reported quarterly sales and adjusted earnings results that beat
analysts estimates on Friday, but its shares fell on concerns about some
of its industrial businesses and its cash outflow.
The maker of jet engines, power plants and other industrial equipment
also reported a negative $1.6 billion in cash flow from industrial
operating activities compared with a negative $600 million it expected
for the quarter due to a $1.3 billion increase in working capital and
the timing of bills to customers.
Investors have been watching cash flow as an indicator of GE's operating
performance, and GE said it still expects to hit its cash target of $12
billion to $14 billion for the full year.
Shares were down 2.3 percent at $29.57 in afternoon trading, making it
the second-biggest decliner on the Dow Jones Industrial Average.
"There was immediate disappointment that cash came in low," said Deane
Dray, analyst at RBC Capital markets. Analysts asked numerous questions
about it on the conference call and "it gave investors a reason not to
feel good about the quarter."
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The company also raised concern by giving itself wiggle room to deliver
fewer LEAP aircraft engines this year, a key risk for the company. It
said the range for the year was 450 to 500 engines, instead of nearly
500 it stated earlier.
"It is notable that GE is taking a more cautious slant by backing away
from a firm target of "500," Vertical Research Partners analyst Rob
Stallard said.
But GE Chief Financial Officer Jeff Bornstein said in an interview there
was no change in the LEAP forecast.
"We're not changing our view on our ability to deliver the LEAP engine
this year for Boeing and Airbus," Bornstein said.
GE shipped 81 engines in the first quarter and expects to ship 100 in
the second quarter, he said, adding: "There's no delays to customers
whatsoever."
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![](../images/042217pics/busine79.jpg)
The General Electric (GE) logo marks containers in the parking lot
of a facility in Medford, Massachusetts, U.S., April 20, 2017.
REUTERS/Brian Snyder
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GE beat analysts estimates for adjusted earnings and revenue, even though
revenue fell 1 percent to $27.66 billion, due to lower sales in its oil-and-gas
and lighting businesses. Analysts expected $26.26 billion, according to Thomson
Reuters I/B/E/S.
Adjusted earnings of 21 cents a share were unchanged from a year ago and beat
analyst estimates of 17 cents, according to Thomson Reuters I/B/E/S.
GE said industrial organic revenue, which is from continuing businesses, grew 7
percent in the quarter, a strong showing according to analysts. Industrial
operating profit margins rose by 1.3 percent points, also more than analysts
expected, and ahead of the 1 percentage point forecast for the year.
Chief Executive Officer Jeff Immelt noted a 10 percent rise in quarterly orders
and said the world economy was "an attractive environment for GE."
"We see global growth accelerating, while the U.S. continues to improve," Immelt
said on the conference call, adding that growth in China, Southeast Asia, Latin
America and Africa this year were all "stronger than last year."
Separately, European engineering groups ABB Ltd and Schneider Electric SE are
competing for GE's solutions division, which could fetch as much as $3 billion,
according to people familiar with the matter.
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(Reporting by Alwyn Scott in New York and Rachit Vats in Bengaluru; Editing by
Sriraj Kalluvila and Bernadette Baum)
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