GE surges as CEO Larry Culp gains handle on cash burn with revamp

Bloomberg

General Electric Co. soared after revealing that it burned less cash to start to the year, boosting Chief Executive Officer Larry Culp’s effort to rejuvenate the ailing manufa- cturer amid a global slowdown in the power-equipment market.
GE’s industrial businesses went through $1.22 billion in cash in the first quarter, the company said in a statement as it reported earnings. That was better than Wall Street’s expectations for an outflow of $2.9 billion, and an improvement over last year’s $1.76 billion depletion.
“Our quarterly results were better than our expectations,” Culp said in the statement, in which GE reaffirmed its 2019 financial forecasts.
“This is one quarter in what will be a multiyear transformation, and 2019 remains a reset year for us.”
The results provide the first glimpse of what is expected to be a rough year for cash generation after Culp warned last month that GE would burn as much as $2 billion this year. The company anticipates a rebound next year for industrial cash flow, a closely watched metric that is considered a gauge of earnings potential, as Culp seeks to repair the balance sheet and regain investor confidence amid one of the worst slumps in the company’s 127-year history.
GE surged 8.2 percent to $10.53 before regular trading in New York. The shares climbed 34 percent this year, topping the 21 percent increase in a Standard & Poor’s index of industrial stocks.
The cash performance was helped by a big increase in free cash flow tied to depreciation and amortisation. That partially offset a $1.9 billion outflow related to working capital, which the company attributed to “inventory bui-ld” and other collection issues in the power and renewable-energy businesses. GE also had a $400 million outflow driven largely by employee-compensation payments.