General Electric (NYSE:GE) second quarter earnings beat analysts’ forecasts and boosts cash flow

A developing recovery

general electric earnings beat analysts' forecasts


The aviation industry, which is normally the company’s revenue source, has been badly affected by the Covid-19 outbreak, with airlines canceling flights and planes grounded. Chief Executive Larry Culp needs a recovery in the aviation industry to produce $7 billion in free cash flow by 2023, which will give the firm more means to invest in its businesses, pay a more competitive dividend, and purchase additional equities. The company is exhibiting early signals of revival, according to General Electric.

GE’s sales fell by 25% in Q2 2020, largely due to lockdowns, which had a severe impact on the company’s aviation sector. The economy has gained up speed now that over half of the US population has been properly vaccinated, and most nations have started large-scale vaccination campaigns on a worldwide scale.

On Tuesday, General Electric raised its full-year free cash flow estimate, citing expectations that a rebound in the aviation sector will increase demand for the company’s jet engines and spare parts.

General Electric’s earnings and predictions

GE General Electric Wind Turbine


In the quarter ending June 30, revenue increased to $18.28 billion, up from $16.81 billion the previous quarter. This compares to Refinitiv’s average analyst expectation of a $287 million outflow, which follows a $2.1 billion outflow last year. General Electric announced an adjusted profit of 5 cents per share for the quarter, whereas an average analyst’s expectation from Refinitiv is 3 cents per share.

The Boston-based business forecasted a raise from $3.5 billion to $5 billion in free cash flow in 2021, comparing to the previous predictions from $2.5 billion to 4.5 billion. In the premarket session, shares rose 3.7 percent to $13.4.

Investors constantly monitor free cash flow as an indication of GE’s operational health and capacity to deleverage. GE’s current debt is at about $71 billion, compared to a staggering $134 billion in 2018. The firm has sold a number of assets in order to decrease its debt, and it is still doing so. Although the corporation’s liabilities are anticipated to remain above $70 billion in 2021, the debt is projected to reduce significantly in the future years, owing to predicted increases in cash flows from its aviation sector and its shareholdings in other firms such as Baker Hughes and AerCap.

General Electric has a great potential to expand and grow, even though the year 2020 took a toll on businesses overall and generated many price anomalies.

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