(Reuters) – General Electric Co (GE.N) sold more investors on its turnaround story on Wednesday, sending shares 10% higher on its quarterly profit and cash results that beat forecasts, and its bullish cash target for 2020.
The results marked a fourth consecutive quarter that GE beat its forecasts, reinforcing a view that Chief Executive Officer Larry Culp was making progress in rescuing the ailing maker of jet engines, power plants, medical imaging equipment and other industrial goods.
“It’s still in a turnaround, but with each quarter of solid results, more people are getting on board with the turnaround story,” said RBC Capital Markets analyst Deane Dray.
Shares surged 10.2% to $12.92 in afternoon trading.
GE on Wednesday also said it would slash 737 MAX engine deliveries to Boeing Co (BA.N) roughly in half this year. But it still set a higher cash target for 2020 of $2 billion to $4 billion – above the $3 billion analysts expect on average. That helped fuel the share rise, said William Baird analyst Nick Heymann, who said the new target marked a confident step up from GE’s 2019 target of $0 to $2 billion in cash.
GE’s 2020 adjusted profit forecast, at 50 cents to 60 cents a share, was less than the 66-cent Wall Street average forecast. But much of the future depends on how events play out with the 737 MAX, the company said.
Culp said on a conference call that GE will slow production of its LEAP 1-B engine for the 737 MAX, but will keep its line running to protect suppliers and prepare for increasing engine output in the second half of the year.
Boeing plans on the jet going back in service at airlines in the second half of 2020, and GE’s forecasts rest on that timing, Culp said. GE plans a deeper outlook discussion for March 4.
Meanwhile, GE is trying to tackle its problems by increasing “operational rigor” and lean manufacturing, Culp stressed on the call, suggesting simple measures such as calling on customers and collecting bills will improve performance.
GE’s power division has made progress in these areas, he said, but still needs work: It “will be better next year from a cash perspective but still not positive.”
