General Electric burned through another $1 billion in cash during the second quarter, but the struggling conglomerate continues to make headway in recovering from a disastrous past few years.
GE’s better-than-feared results and forecast suggest the company’s beleaguered power division could be turning a corner.
That recovery will continue without GE’s finance chief, however. The company announced that Jamie Miller plans to step down from her role as chief financial officer. GE has launched a search to find a replacement.
Orders tumbled by 22% at GE Power, which makes turbines and systems for natural gas and coal power plants. Profit plunged 71% to $117 million in the division.
Pressured by power, GE reported negative industrial free cash flow of nearly $1 billion, compared with positive free cash flow of $316 million the year before. GE previously told Wall Street it could burn between $1 billion to $2 billion on the quarter.
However, GE’s per-share earnings topped Wall Street’s expectations, and GE reiterated it expects to generate free cash flow in 2020, with “further acceleration” in 2021.
CEO Larry Culp hailed “improvements” at GE Power, which has been shutting down plants to adjust to shifting dynamics.
That progress, along with lower restructuring costs and other positives, led GE to raise its full-year outlook. GE now anticipates industrial free cash flow between negative $1 billion and positive $1 billion for 2019. GE previously warned it could burn through as much as $2 billion on the year.
GE also raised its adjusted earnings per share and organic revenue guidance.
The company’s stock, which was kicked out of the Dow Jones Industrial Average last summer, jumped 5% in premarket trading.
“We will continue to take planned actions to improve our businesses and monitor some market headwinds,” Culp said in a statement.
GE did not give a reason for Miller’s departure as CFO. The company said she has agreed to remain in her role for now to assist with a smooth transition. Miller was at the center of GE’s effort to clean up its debt-riddled balance sheet by unloading businesses.
Some investors feared GE faced an existential crisis last year due to its cash problems. However, those fears have largely subsided, underscored by the surge of more than 40% in GE’s stock this year.
“With the progress we’ve made and the stabilization beginning to take hold,” Miller said, “the time is right for my transition.”
The 737 Max grounding
GE Aviation continues to be a relative bright spot. The company’s shipments of LEAP engines nearly doubled and its backlog grew thanks to strong demand at the Paris Air Show.
However, the outlook for GE Aviation has been clouded by Boeing’s 737 MAX crisis. A GE joint venture supplies engines for the plane, which has been grounded due to safety concerns.
GE said it “continues to work closely with Boeing to actively manage our engine production.” Boeing recently warned it may need to halt 737 MAX production as it awaits FAA approval to return the jet to the skies.